UBS analysts have concluded that sneaker stores like Foot Locker and Finish Line are poised to lose their markets to the online megamarket Amazon.
On Monday, UBS analyst Michael Binetti said it’s “almost certain” both companies will lose market share to Amazon, according to Business Insider. He said that trends showed from 2016 to 2017, customers were less likely to visit either sneaker store but more likely to purchase from Amazon.
Other bad signs for the businesses, according to Binetti, are that shoe manufacturer Nike is now emphasizing selling its shoes directly to consumers, similar to a restaurant POS system, and both sneaker stores are more likely to be found in malls that lost a Macy’s or JC Penney, which means the malls are likely to see less foot traffic.
“The combination of an accelerating shift of purchase to both Amazon and the brands’ own website – and the subsequent reduction in purchase intent through athletic specialty retailers like Foot Locker – makes it hard to see the path back to accelerating market share gains for Foot Locker,” Binetti said.
UBS downgraded Foot Locker, which dropped to a five-year low of $32.23 Monday according to Financial Times, to “neutral” status. It also dropped Finish Line to “sell” as a result of the anticipated losses.
On Friday, Foot Locker’s CEO Richard Johnson said he wasn’t worried about Amazon. “There is no indication that any of our vendors intend to sell premium athletic product directly via that sort of distribution channel,” he said, according to Financial Times.
Amazon has been accused of negatively impacting a number of industries in the past, from major department stores like JC Penney, to small local businesses, to niche stores like Borders and Radio Shack.
Experts blame the “Amazon factor,” according to San Francisco Gate, which says that customers are now interested in shopping online because of Amazon even if they use another website, and prefer sites that offer convenience, options and fast delivery.
“Circuit City, Borders and many others were forced out of the market because of online shopping and Amazon’s influence. But thanks to Amazon and other online stores, consumers get more bang for the buck,” said business analyst Tim Bajarin, according to San Francisco Gate.
