After Amazon.com Inc. went through twenty years of solid growth, some may think that its shares would dwindle anytime soon, and its market-crushing gains are just a thing of the past. Some may think such torrid growth would eventually have to end, especially after two decades.
Such is not the case for the e-commerce juggernaut, especially today. According to analysts, there are three main reasons for investors to buy AMZN shares:
Robust sales growth
91.7%-- that’s the percentage of US retail sales conducted offline. Said differently, e-commerce sales, even after years of remarkable growth, still accounts for less than 10% of retail sales.
eMarketer, a research company, projects that global retail e-commerce sales will surge to over $4 trillion in year 2020, higher from less than $2 trillion last year. With millions of people gaining access to the internet annually, e-commerce looks slated to grow at a rapid pace for at least another ten years, and likely longer.
From this megatrend, Amazon stands to benefit more compared to any other firm.
Amazon becomes “shopping”
In the minds of consumers, the American retail giant is growing progressively synonymous with “shopping”.
According to a report from BloomReach, a marketing firm, 55% of consumers initiate their search on Amazon’s website when shopping online in September. This is up from 44% the prior year. During that period, the share of shoppers whose shoppers began at all other retailers’ sites combined dived from 21% to 16%. Additionally, the retailer is also taking share from search engines. The percentage of consumers who started their product hunts on search sites dropped from 34% to 28%.
Again, this powerful trend is proof of Amazon’s increasingly prevailing consumer mindshare. Investors should anticipate these numbers to continue their uptick in the coming years as Amazon’s rivals continue to struggle.
Dominance over brick-and-mortar
Not only does Amazon prevail in retail search rankings, but also in the aspect of ripping traditional retailers apart. There has been a number of struggling retail stores that surfaced, especially after the crucial holiday period, wherein Amazon had outdone its brick-and-mortar competitors.
One of which is J.C. Penney, which recently announced that it plans to shut down around 130 to 140 stores after delivering disappointing holiday sales. This accounts for 13% to 14% of the retailer’s current store base. Chairman and CEO Marvin Ellison openly admitted that the growth of e-commerce was a chief reason for the closures.
“We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers,” Ellison stated.
More besieged retailers are on this list, including Sears Holdings, Macy's, Kohl's, Abercrombie & Fitch, and Office Depot. All of the names mentioned have closed stores in response to Amazon’s dominance in e-commerce revolution. Analysts expect that some retailers may not survive as they lose shares to Amazon.
AMZN stock analysis
In the last trading session, Amazon had ended with a measly downtick of 0.06% or 54 cents to trade at $852.15. In afterhours, it dipped 0.05% to 852.01.
Only recently, AMZN shares hit an all-time peak of $860.49 on February 23’s session, a fitting place after a strong bullish trend. In the bigger picture, Amazon showed solid growth marked by huge leaps beginning January 2015, compared to the slow but steady growth from 2001 to the end of 2014. One can attribute this massive growth to the digital revolution, as data showed and proved that online retailers like Amazon are becoming increasingly more appealing to consumers compared to traditional retail stores.
The online retail company is now placed to catch a large band of the rapidly growing global e-commerce market as its competitors crumble. In turn, AMZN shares should continue to post handsome gains to shareholders in the years ahead.
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