Will Offline Dominance Be The Next Major Driver Of Amazon Stock?

  • Amazon is a highly innovative company and wants to gain significant revenue from all stages of the buying process.
  • The Echo allows them to make a huge foray into the home.
  • Will offline dominance will be the next major driver of Amazon stock?

With a market cap of $247.6 billion and a staggering revenue of $107 billion, it is mesmerizing that Amazon (NASDAQ:AMZN) began as just a bookshop. Undoubtedly, one of the most admired American companies in investor circles, Jeff Bezos and his team just seem to do everything right.

Also, Amazon's ability to spot future trends and innovate to meet them is exceptional.

For instance, when the Amazon Kindle was launched, there was some sentiment that it would be a complete failure due to people's need to "feel the book". However, fast-forward to now, and Amazon's e-reader is much more than that. It is a platform with a stranglehold on the industry. Consequently, any author who decides not to offer their book on the Kindle store is unlikely to make the New York Times or comparable best sellers list.

Amazon has come under significant scrutiny for failing to show a significant profit in the last....well, ever. However, this is due to their strategy of continuous reinvestment.

Despite owning the world's largest e-commerce site, and AWS, which is forecast to surpass $10 billion in revenue by the end of 2016, Amazon is still hungry for growth.

And this time, they want their products and services to dominate your home and the food industry.

Amazon Is Coming After The Food Industry

Amazon's infrastructure is arguably the best on earth. Therefore, it makes business sense, that they are leveraging it in order to scale.

Recently, Amazon offered Amazon Prime customers living in Italy, the opportunity to purchase fresh fruits and vegetables for delivery within 1 to 2 hours.

Amazon is a master at landing in a foreign industry and dominating within a short period of time.

In 2014, $594.4 billion of grocery store sales were generated in the U.S alone. Amazon's brand, infrastructure and execution leave it in a great position to take significant market share in this industry.

Amazon ready to storm the shipping industry

In a leaked report discovered by Bloomberg, Amazon details an ambitious plan to control the shipping, storage and fulfilment of goods from merchants at home and overseas. Also recent reports about Amazon leasing delivery jets is another indication of Amazon's bold plans.

At the moment, merchants have to rely on companies such as Fedex and UPS to deliver their goods to international customers. However, Amazon wants to control that process and open up a lucrative revenue stream.

Notably, if well executed, this would be incredibly convenient for merchants and customers. Merchants would be able to have access to Amazons 'reliable' infrastructure and get their products delivered on time.

For example, a merchant living in Asia can "summon" Amazon to pick up his or her products from the factory, load it onto a ship, and get it sent overseas. Upon arrival, it is plugged into Amazon's formidable infrastructure, and delivered to the customer.

The report indicates that this service would be available to all merchants. If this plan goes ahead, Amazon could control a large portion of the freight and shipping & handling industry.

Amazon Looking To Dominate The Home

Amazon released the "Echo" in 2014. This is a device with voice recognition and speaker functionality which connects to Amazon's services via WiFi. Users can search the web, order items using voice commands, and get news read to them.

Interestingly, Amazon is allowing developers to build a whole set of apps around the device. The vision is that Amazon users would be able to control much of their home using this one device.

Notably, this provides Amazon with a lot of information on their customers; thus, the device is also a trojan horse for market research.

The aim is to increase revenue using this device in the home. For instance, Amazon users can order products with a simple voice command.

Conclusion

In conclusion, Amazon is taking diversification to  a whole new level. Amazon wants to generate revenue from all stages of the buying process and have a bigger impact on the day-to-day lives of their customers.

It seems that Amazon wants to be the company for everyone and their constant reinvestment of profits allows them to do just that.

Amazon stock is an attractive investment option.

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  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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