Amazon.com, Inc. (AMZN) Is Positioning Itself Well For The Long Term

Page 1 of 2

Amazon.com, Inc. (NASDAQ:AMZN)Amazon.com, Inc. (NASDAQ:AMZN) is positioning itself for revenue growth, and is making various investments to achieve this. It continues to make acquisitions such as Goodreads, as well as invest in improving its core business. These investments often sacrifice margins for long-term growth, but this is a strategy that has worked for Amazon.com, Inc. (NASDAQ:AMZN) in the past and helped its stock outperform its large cap tech peers.

Amazon Prime

Amazon Prime customers account for around 15% of Amazon.com, Inc. (NASDAQ:AMZN)’s customer base, and their numbers are growing. They pay $79 a year for cheaper and faster delivery, access to lending library books, and other services. These customers spend 2-4x the amount of non-Prime customers annually. The percentage of customers who subscribe to Prime is expected to grow, as are the services offered. While Prime boosts revenue per customer, it carries a negative mix impact in the near-term.

Add Fulfillment Centers

Amazon has been building more and more order fulfillment centers every year since the downturn–20 in 2012 versus 13 in 2010. This will reduce shipping costs and improve customer service via reduced shipping times. Amazon’s value proposition has always included best in class customer service, and this investment helps it maintain the 2 day shipping policy for items sold to Prime customers. In the near-term, the investment and mix shift to higher cost Prime customers will negatively impact margins. That said, lower shipping costs through more ground vs. air shipments and an increased bundle rate will help to somewhat offset this.

Kindle Services

The Kindle offerings have expanded over recent years, and Amazon now offers a range of e-readers and tablets. The Kindle has positioned Amazon to benefit from the transition from buying physical books, music, and other physical media into the consumption of digital media. Selling the device allows the customer to purchase more digital media from Amazon versus competitors like Apple Inc. (NASDAQ:AAPL)’s iTunes. Amazon will continue to invest in devices and sacrifice margin to gain customers for its digital services.

Amazon.com, Inc. (NASDAQ:AMZN) also is expanding its digital media footprint via acquisitions. It announced it is acquiring Goodreads on March 28, 2013. Goodreads is the largest book recommendation website and reading related social media site on the web. It has 16 million users, 530 million books, 68,000 authors, and 23 million reviews. The terms of the deal were not disclosed. Goodreads will fit well into Amazon’s Kindle business and expands its core capabilities into social media. It also should have synergies with the Audible and IVONA acquisitions. Depending on the integration, and ultimately the promotion of Amazon products through Goodreads, Apple Inc. (NASDAQ:AAPL)’s iTunes and Google Inc (NASDAQ:GOOG) Play could lose some of their digital books market share to Amazon. Amazon currently makes up 27% of the book sales in the US, while Apple and Google sell much less.

As of Feb. 6, 2013, Apple’s iTunes had sold 25 billion songs–however, iBook sales have been considerably lower.  Apple Inc. (NASDAQ:AAPL) announced in October 2012 that book sales had reached 400 million units.  This would account for a very small portion of Apple’s revenue.

Apple has also taken a shot at creating a social network with Ping. Ping wasn’t very successful and shut down in late 2012. Of course, Google has Google+, but it is currently not revolving around products such as books.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!