Amazon, from online bookstore to business giant

Winning big new markets is by no means assured, and Amazon’s spending on its far-flung initiatives is immense, which already has created earnings disappointments. But Amazon’s growth record so far speaks for itself. As Bezos put it, 20 years ago he was driving some boxes to the post office and thinking about forklifts. In a letter to shareholders a year later, Bezos wrote that online bookselling, and e-commerce in general, “should prove to be a very large market.” It did.

The No. 1 online seller posted revenue of $107 billion last year, 22 years after its founding, hitting the $100 billion mark quicker than any company. Its stock has surged roughly 330% over the past five years — and nearly 200% in the last 10 years vs. just over 60% for the S&P 500.

Bezos has said that both Amazon and AWS “were planted as tiny seeds.” Not every seedling will grow into a redwood, but Bezos says the goal for each seedling is annual sales of at least $1 billion.

AWS leads its field though it faces a horde of big-name rivals that quickly caught on to Amazon’s move, led by Microsoft (MSFT), IBM (IBM) and Alphabet (GOOGL). “Amazon Web Services is a major reason to own the stock,” said Dan Morgan, senior portfolio manager at Synovus Trust, which holds a position in Amazon.

Other efforts produced unexpected hits, like the Echo — an in-home, voice-activated digital butler that plays music, reads books and provides traffic and weather, among other things. Teamed with Alexa, its voice and brains, the Echo smart speaker has grabbed a post position in the race to give the world the best and smartest digital assistant, another battle that pits tech’s giants.

Amazon won’t say, but analysts estimate it’s already sold some 4 million Echo speakers, at prices ranging from about $100 to $200. It’s a product that further cements a user’s attachment to Amazon.

Those parts include retail. Amazon reportedly plans to open dozens of small retail storefronts in shopping malls over the next year to showcase its hardware such as the Kindle and Echo.

The first Amazon physical bookstore opened last year in Seattle. Amazon has since opened bookstores in San Diego and Portland, Ore., with another one coming in Chicago. The bookstores also sell its hardware, reflecting Amazon’s ongoing drive to reach consumers through a variety of channels.

It’s also pushing deeper into the grocery business, which it entered in 2007 with the launch of the grocery delivery service Amazon Fresh.

Amazon plans to develop convenience stores as well as curbside pickup locations, the Wall Street Journal has reported, citing people familiar with the matter. Amazon apparently will let customers order groceries online and pick them up at a company facility, which could add billions in revenue, says Pacific Crest Securities, posing an increasing threat to No. 1 retailer Wal-Mart (WMT).

Analysts also expect Amazon to become a force in the shipping business, competing with the likes of FedEx (FDX) and UPS (UPS). The company has announced the purchase of a fleet of trucks to ferry goods between its fulfillment centers. And Amazon has an agreement to lease up to 20 Boeing 767s from Air Transport Services Group (ATSG) to expedite delivery of goods.

Amazon in August unveiled its first branded cargo plane, as the company builds its own air transportation network. (AP Photo/Ted S. Warren)

Of its many ventures, Amazon Prime might be its biggest success. Launched in 2005, for $79 a year the loyalty program gave users free two-day shipping. The perks have steadily risen. The price, too, has risen, but just once, to $99 in 2014.

Amazon Prime perks now include free access to Amazon streaming videos and commercial free music, free photo storage, free same-day shipping in 27 metro areas, exclusives on select offerings and more. Prime members spend on average about $2,500 a year on Amazon, vs. $550 for non-Prime members, according to Morgan Stanley data.

Amazon won’t say how many Prime members it has, but the figure is near 65 million members in the U.S., according to Consumer Intelligence Research Partners.

Source: Investors