Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Amazon (AMZN) Enters B2B Beauty, Expected To Quickly Gain Market Share


Amazon (AMZN) is coming to your barbershop.

The e-commerce giant announced last month it is entering the B2B beauty market, allowing stylists and hair professionals access to brands at wholesale prices. The initiative, called Amazon Professional Beauty Store is being launched to provide a one-stop-shop for all industry needs. Amazon said it can “address…stylist pain-points with its large number of selling partners and fast, convenient delivery directly to their business.”

With the jump into B2B beauty, the company faces new competition from online retailers specifically targeting these customers, but given Amazon’s size and power, analyst Stephanie Wissink of Jeffries predicts that Amazon will quickly take back market share. 

Wissink rates AMZN stock a Buy with a $2,300 price target, which implies nearly 20% from current levels.

Wissink says Amazon “has signed on a large number of partners, including Wella (COTY), the largest brand in color, alongside Joico and Schwarzkopf.” But while it’s off to strong start, the analyst says it could take two years to build its roster of brands. Nevertheless, this shouldn’t come as a problem as the analyst expects “Amazon to quickly become an important enough channel for brands to carry their top offerings on the platform, as has been the case for Amazon’s other B2B classifications.”

A major reason why Wissink expects Amazon to quickly become an important player in this market is that the company offers customers an economic advantage” by “bringing goods to the stylist. While the current process works with the stylist often travel[ing] to multiple cosmetology supply locations to get necessary supplies, Amazon will be a one-stop-shop, allowing businesses to save time and money.

Amazon continues to grow its business by reaching different markets that may not have been significantly penetrated by online competition. But the company also continues to expand its services to customers, including Prime delivery. Recently, Amazon announced it would make Prime even more enticing by replacing two-day shipping with one-day shipping. On delivery and other services, Amazon is able to undercut the competition as its other segments — including AWS and logistics — help cover costs for retail. 

All in all, Amazon’s the leader in e-commerce, and rivals are holding on to compete. Its unfair advantage is that it generates significant profit from non-retail segments, allowing the company to reinvest in retail and offer services others cannot. Amazon’s differentiated and improved offerings have made its stock very, very attractive. TipRanks analysis of 37 analyst ratings on the stock shows a Strong Buy consensus, with 36 analysts recommending Buy and one suggesting Hold. The average price target among these analyst stands at $2,245.47, which represents a 16% upside. (See AMZN’s price targets and analyst ratings on TipRanks)

 

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