Amazon.com, Inc. (NASDAQ:AMZN): Why the World’s Biggest On-Line Retailer Will Only Get Bigger
Amazon.com, Inc. (NASDAQ:AMZN) is taking Wal-Mart Stores Inc. (NYSE:WMT) and the entire retail sector to task. In the second quarter, as announced last July, Amazon posted 20% higher revenues and a surprise profit, beating analysts’ expectations on both counts, pushing its market value to over $247 billion. This is higher than its biggest rival, Wal-Mart; thus revolutionizing the retail industry.
Yes, Amazon, which just celebrated its 20th birthday, is worth more than the world’s largest retailer, which is “only” worth $230 billion. The Bentonville, Arkansas-based company has 11,767 stores worldwide and a much higher annual revenue of $485.65 billion at the end of fiscal 2014 year compared to Amazon’s $89.0 billion. But, it’s only a matter of time before Amazon surpasses Wal-Mart in revenues as well.
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Investors like Amazon’s ability to cut costs even as it drives up revenue. Amazon attributed the strength of its profits to the continued strength of its cloud computing business and strong revenue growth in the U.S. and abroad even while keeping a tight lid on the costs of marketing, packaging, and delivery.
In the last quarter, Amazon’s performance confirmed what many analysts had been noticing: when things are going well, they are going very well! The company has achieved strong growth in just about every operation, product category, and geographical segment according to William Blair analyst Mark Miller. He added that the most notable improvements were in the annual membership to the company’s Prime program, sales by third parties, and logistics and delivery systems capacity.
Moreover, Amazon Web Services, which includes cloud-computing activities, saw its division distinguishing itself for 81% higher revenues of $1.82 billion. This is one of the main growth areas, which will both boost revenue and drive up margins.
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Should that fail to excite your investment appetite, Amazon Prime members can now download (at no extra cost) films and TV series episodes on their Apple and Android mobile devices. Subscribers don’t even have to be connected online to enjoy their favorite movies and programs.
Indeed, after boxing Wal-Mart into its own literal and metaphorical box, Amazon has taken the fight to Netflix, Inc. (NASDAQ:NFLX) with its streaming video service. Amazon’s is the first and only streaming subscription service to offer the option, according to the company. Prime Video is a service included in the subscription to Amazon Prime (US$99.00 per year in the United States, which includes free delivery for purchases and access to digital content such as electronic books or music).
This was already operating on a small scale on some Kindle Fire tablets. However, the technology takes on a new dimension with its extension to iPhones, iPads, and phones and tablets running Android. The download feature has been added to Prime Video applications for Apple and Android mobile devices, and is now available in the U.S., U.K., Germany, and Austria.
Prime Video claims to have tens of thousands of films and TV series in its catalog from all the big studios and media companies. Still, Amazon, run by hyper-productive CEO Jeff Bezos, is not satisfied. And like Netflix, it is developing its own original content. Its new series Transparent, about a transsexual father, is the most famous example.
Amazon is also very serious about deploying delivery by drones, which will propel the company into a new dimension of retail domination.
Last year, Amazon filed for a patent for autonomous drones by delivery system. Since then, the giant online sales has increased efforts to develop the concept beyond the actual technology, which is by and large ready, to preparing the regulatory environment, lobbying the government, and obtaining permission to test its drones in the U.S.
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Amazon calls the delivery by drone service Prime Air. The company envisions it as a substitute, if not an outright replacement, for the delivery truck much to the chagrin of couriers FedEx to UPS. Bezos said technical problems are close to being resolved while only regulatory ones are standing in its way.
The technology of autonomous flying drones already exists; drones can fly along a specific path, guided by GPS. Of course, to allow Prime Air to operate, the technology must ensure that delivery drones can navigate the urban jungle without hitting other flying objects like birds, other drones, or humans when delivering to the customer.
The combination of drones with Amazon’s “Dash,” a new product unveiled last March that enables customers to order frequently replaced items from toilet paper to laundry detergent via a product labeled Wi-Fi connected button, makes Amazon’s growth possibilities too large for the mind to contemplate.
Imagine, as the stress you feel when noticing the last sheet of toilet paper dangling menacingly at your isolated cottage, miles away from the nearest grocery store, turns to wonder and gratitude. Have no fear; all you have to do to return to polite society in tip-top form is hit the Amazon Dash button and a drone appears from the sky, bringing you the latest and softest toilet paper you’ve ever seen, wiping away the embarrassment rather than the smile from your face.
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