Amazon seen beating rivals in holiday season

By Alexandria Sage - Analysis

SAN FRANCISCO (Reuters) - Amazon.com Inc (AMZN.O) may outperform other Web retailers this holiday season as its scale, flexibility and popularity help it stand out in an online price war.

As online retailers vie to outdo each other and their brick-and-mortar rivals in offering deals that consumers will be hard pressed to pass up on, analysts said Amazon's market share could grow. A survey showed the online retailer was "the clear leader" in Web commerce.

While Amazon shares dropped 5.22 percent on Monday, that was better than the 8.95 percent decline in the Standard & Poor's 500 index and 6.85 percent drop in Internet rival eBay Inc (EBAY.O). Some smaller online retailers, such as Overstock.com Inc (OSTK.O) and Blue Nile Inc (NILE.O), suffered bigger falls of 15.35 percent and 12.74 percent, respectively.

The declines were a bad omen, particularly on the first Monday after the holiday shopping season officially began last Friday.

Web traffic to online shopping sites is supposed to rise on so-called "Cyber Monday" as consumers log on from work to find better deals than they saw on visits to physical stores. However, some investors feared deep discounts from traditional retailers may have stolen the thunder from online rivals.

Amazon, though, is seen by many as the surer bet online.

A J.P. Morgan Internet survey showed Amazon to be the "clear leader in U.S. eCommerce," with nearly half of the respondents planning to shop at Amazon, and 59 percent of users with incomes over $100,000 saying they shopped there. No other site captured more than 33 percent.

"It seems they (Amazon) have done so much better than everyone else, or better than the market seems to be indicating," said Pacific Crest analyst Steve Weinstein.

Stifel Nicolaus analyst Scott Devitt wrote in a note that he expects "Amazon will be one of the best performers this holiday season and over many future holiday seasons."

In a season rife with online promotions, ranging from Wal-Mart Stores Inc (WMT.N) to Best Buy Co Inc (BBY.N), Amazon's advantage is flexibility, which serves it well when rivals lower prices, Devitt wrote.

He noted that a national electronics retailer which he didn't specify, advertised a plasma television on sale last week for $949, together with a $50 gift card. Within three days, Amazon's best price of $974 had dropped to $899 with free delivery.

At the same time, Devitt lowered estimates for eBay, Overstock.com, and diamonds and jewelry online retailer Blue Nile.

Shares of Amazon are down 56 percent since January versus a 63 percent decline for eBay.

AMAZON VS EBAY

While both Amazon and eBay have warned of a challenging holiday season, Wall Street is more skeptical of eBay's earnings power.