A completely new subscription offering through Amazon could be a major threat to Lake Forest, Illinois-based industrial supplier W.W. Grainger.
Shares of GWW fell more than 3 percent to $202.05 Tuesday afternoon after Amazon Business announced an upgrade to their shipping services for business customers. The completely new Business Prime Shipping service offers free two-day shipping to multi-user business accounts in Germany along with the United States, a feature Amazon says will simplify procurement.
Business Prime Shipping directly competes with at least two Grainger operations, including the Japanese e-commerce unit MonotaRO Co along with the British distributor Cromwell. Taken together, the two companies account for 11 percent of Grainger’s total sales, according to a research note through RBC Capital Markets.
“Given parent Amazon’s deep pockets along with apparent margin insensitivity, we continue to believe in which Grainger will be drawn into further cost competition, putting more pressure on its gross margin,” the analysts wrote. “We reiterate our high-conviction Underperform rating on GWW shares.”
Grainger shares have been struggling This kind of year. The company is usually down more than 12 percent year to date, despite a boost earlier This kind of month when the company reported better-than-expected third-quarter earnings.
Representatives for Grainger did not immediately respond to a request for comment.
— With reporting by Morgan Brennan.