Industrial supplier W.W. Grainger (NYSE:$GWW) has a new enemy – and it’s in the form of a subscription offering from Amazon (NASDAQ:$AMZN). On Tuesday, GWW shares dropped more than 3% to $202.05 after Amazon Business disclosed an upgrade to their shipping services for business customers. What does the new Business Prime Shipping service entail? Multi-user business accounts in Germany and the U.S. will be offered free two-day shipping, which is a feature Amazon says will simplify procurement.
Amazon’s Business Prime Shipping competes with two W.W. Grainger operations, such as the Japanese e-commerce unit MonotaRo Co. (OTC:$MONOF) and the British distributor Cromwell. According to a research report from RBC Capital Markets, when these two operations are taken together, they account for 11% of W.W. Grainger’s total sales.
“Given parent Amazon’s deep pockets and apparent margin insensitivity, we continue to believe that Grainger will be drawn into further price competition, putting more pressure on its gross margin,” RBC Capital Markets wrote. “We reiterate our high-conviction Underperform rating on GWW shares.”
While the Business Prime Shipping offer is the latest punch to Grainger’s gut, it isn’t actually the first time W.W. Grainger’s stock has taken a hit. In fact, the Lake Forest, Illinois-based company has been struggling as of late. Despite an increase earlier this month, the company is still down more than 12% year to date.
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