This morning Le Monde reported that Amazon obtained from the US Government the license to sell Over the Counter medicines.
So it is official: pharmacies are the next incumbents that are going to be disrupted by Amazon.
The American medicines market is huge, equal to $325 bn in 2015 (+9% vs. 2014) but has a big difference compared to the markets that Amazon disrupted so far (books, nappies, batteries, DVDs, .....).
The American market is extremely consolidated. 2 players, CVS and Walgreen, control 70% of the market and I suspect are not going to be easy targets for Amazon.
When Amazon enter in a new market its main tactic is a price war. It was slashing price by 50% that the company was able to send so many bookshops and small mom and pops shops out of business.
CVS and Walgreen are not small guys and potentially are able to fight on the price front.
CVS in 2016 generated $170bn of Revenues, $10bn of EBIT and $5bn of Free Cash Flow from operations. The company has $3.5bn of excess of cash in the Balance Sheet.
Similar story for Walgreen.
I suspected that it will be the American consumer the beneficiary of Amazon entrance in the market and considering that the average American spend 10% of their income in Healthcare, savings on the price of OTC medicines would be reflected in an increase of spending in F&B and entertainment.
Some ridiculous liberal thinkers and left wing journalists claims that Amazon is becoming too big and need to be split. Those guys, usually seat on their nice office in Greenwich Village, claims that Amazon is the Standard Oil of the 21 century and need to be broken.
Apart the fact that Amazon has less than 5% of total US retail market (Standard Oil had a 100% market share), Amazon is a key player in keeping the US inflation rate at a reasonable level, giving millions of consumer access to great products at low price and producing millions of good job in remote American locations.
It is Interesting to see how our liberal friends of the New York Times have shifted their attention from War Mart to Amazon.
Until Amazon emerge as the new liberal enemy, it was Was Mart with its big supermarkets, low paid jobs and employment of illegal immigrants the company to split.
Wal-Mart, the Company that created millions of job providing affordable items in remote locations of the country, was the bad guy.
Again a champion of low price....
I suspect that the liberals that are now calling for a split of Amazon, are not shopping in Wal-Mart or Amazon, and prefer the high standard (and high prices) of Whole Food (ops it it is now owned by Amazon too.......).