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Amazon must take on Waymo to keep crown as king of retail, Morgan Stanley says

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6 years ago

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AmazonAP/Scott Sady

  • Waymo, Google’s secretive self-driving car project, could offer retailers an inexpensive way to compete with Amazon‘s Prime Now, Morgan Stanley cautioned.
  • But if Amazon can build a differentiated autonomous offering, it can have a gross profit that’s 5-15% higher, according to the firm.
  • Amazon’s innovation focus and shipping volume make it “one of a few players who could compete with Waymo,” the Morgan Stanley team says.
  • Watch Amazon trade in real time here.

Amazon is facing a huge disrupter in the retail sector —  Google’s secretive self-driving car project Waymo — Morgan Stanley says. And to maintain its crown as the king of the retail, Amazon should increase its focus on autonomous driving and take on Waymo.

Seeing Waymo’s partnership with Walmart drive shoppers to storefronts and the potential integration between Waymo and Google Shopping to deliver in-store inventory, Morgan Stanley cautions that Waymo could offer retailers an inexpensive way to compete with Amazon’s Prime Now.

But if Amazon can build a differentiated autonomous offering, it can reduce the cost of long-haul transportation by 30-50% and increase its gross profit by 5%-15%, or $10 billion-$30 billion, according to Morgan Stanley’s calculation.

“Amazon is already investing in its own delivery network to improve efficiency and offer a more flexible user offering,” the Morgan Stanley team said in a note sent out to clients on Tuesday, “In many ways, investing in an autonomous offering is just an extension of this strategy.”

Amazon has continued building out its own logistics network over the past few years. The company launched its Prime Now one-hour delivery in Manhattan in December 2014 and expanded the feature to many US cities in 2015. It has also frequently updated its logistic features, such as leasing air freighters, acquiring an ocean-freight forwarding license, and delivering to customers’ car. 

Earlier this year, Amazon announced a self-driving food-delivery concept car with Toyota and reportedly filed a patent for an autonomous ground vehicle that would pick up a package from a delivery truck and bring it to a customers’ home. 

While Amazon has been “relatively silent in the autonomous driving space,” its innovation focus and shipping volume make it “one of a few players who could compete with Waymo,” according to the Morgan Stanley team.

Considering the value of the “millions of long haul and last-mile miles driven delivering Amazon packages”, Amazon has a huge opportunity to build “an autonomous offering on these miles” to catch up with Waymo, the team said.

Morgan Stanley has a “overweight” rating and a price target of $2,500 for Amazon, 28% where shares are currently trading.

Amazon shares are up 65% this year.

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