This Could Spark a Rally in AMZN Stock
The world’s biggest e-tailer, Amazon.com, Inc. (NASDAQ:AMZN) never fails to surprise us. AMZN stock is once again making a move for the $600.00 mark on the back of another exciting development.
Before I get to it, let me remind my readers that Amazon CEO Jeff Bezos has been quietly working on a grand scheme. He wants to transform Amazon into a full-blown retailer, but without a brick-and-mortar footprint.
But how is that even possible? When you run out of eggs, would you head down to your nearest Wal-Mart or do you get on your computer to order them through Amazon? Believe it or not, you might soon be doing the latter.
Bezos is working on making “Amazon Prime” the biggest delivery service owned by any e-tailer in the world. To make it possible, Amazon has so far hired a whole fleet of trucks in the U.S.; invited drivers to become part of its Uber-like delivery service, “Amazon Flex;” has spoken to Boeing to lease its jets for deliveries; and is even working on delivery drones.
In all of this, the common denominator is Amazon Prime. This is where it gets interesting.
For those who don’t know, Amazon Prime is a service that offers its members swift delivery against a flat annual fee of $99.00. The service also includes the on-demand video streaming service, “Prime Video,” thousands of songs, free e-books, and cloud storage for photos.
Let me give you a better perspective on why Amazon is pushing for a bigger Amazon Prime member-base, by taking all these daring steps.
With a modest subscriber base of 10 million members, Amazon Prime can make nearly $1.0 billion in annual revenue, or more than $80.0 million on a monthly basis. That’s a solid perpetual revenue stream for the company.
Now, to reach out to a bigger target base, the company is launching a new retail arm of grocery and everyday essentials—not just in the U.S., but worldwide. In the U.S., “Amazon Fresh” already offers one-hour delivery in major cities and states in the U.S.
The latest news is that Amazon is now partnering with one of the biggest supermarket chains in the U.K.—Morrisons—to introduce a similar service in its British market. (Source: “Amazon Strikes Deal With U.K. Grocer Morrisons,” The Wall Street Journal, February 29, 2016.)
Last year, Amazon launched a fast-delivery service called “Amazon Pantry” in the U.K. The service delivered about 5,000 daily essentials within 24 hours. This new partnership will expand its product offering to fresh fruit and vegetables from Morrisons, which will be deliverable within an hour through its fast “Prime Now” delivery service.
By offering swifter deliveries, Amazon wants to bring in more signups for Amazon Prime. It’s simple! Everybody buys grocery and will certainly be attracted to sign up for the service. And why not, when it’s fast and saves you the hassle of driving down to a supermarket and waiting in long checkout queues for just a dozen eggs?
The Bottom Line on AMZN Stock
Bezos’ plan is ingenious! He is building a global platform with a long-term loyalty program that will continue to bring in solid bucks for the company. Bezos is ready to do anything to make it possible, even if it means starting a full-fledged logistics service to save on costs.
Once the delivery service is perfected, there will be no stopping Amazon from taking away market share from traditional brick-and-mortar grocery retailers. The biggest winners will certainly be holders of AMZN stock.