The strongest brands in the world all share in their ability to conjure up demand for products that consumers hadn't known they wanted yet. These companies aren't reinventing the wheel; they're simply rethinking the customer's needs. As Peter Drucker once said, "The customer rarely buys what the company thinks it sells him." Businesses succeed today by making customers happy. The payoff for you is that these companies often make the best investments.
Consider the world's leading e-commerce site, Amazon (Nasdaq: AMZN ) . Founder and CEO Jeff Bezos created a market that didn't exist. Since its launch in 1995 as a seller of online books, Amazon has grown into the world's biggest online retailer. Today, Amazon's online sales are more than five times those of rivals Wal-Mart (NYSE: WMT ) , Target (NYSE: TGT ) , and Buy.com combined. However, warmer weather in February brought shoppers into the stores giving Wal-Mart and Target a much-needed boost. Target relished the highest sales and comps it's seen in 10 months during the period.
Priced to perfection
In 2011, Amazon's net sales totaled $48.1 billion, marking more than a 40% year-over-year increase for the retailer. However, some investors worry that Amazon's burning cash faster than it can make it. For example, Bezos launched the $79 Kindle Fire last year at a $5 loss. Still, I see this as a small investment that will repay itself many times over as customers become loyal to its massive media ecosystem. Nearly half of Amazon's revenue comes from sales of books, videos, and other media, and its Kindle products act as a gateway to those services.
Amazon's ecosystem is what sets it apart from rival Barnes & Noble (NYSE: BKS ) , which recently released its next-generation Nook device. B&N launched the new e-reader at $199, the same price as the Kindle Fire. At this price point, shoppers will likely choose Amazon's version for the network of services packed in, including an Amazon Prime trial for video streaming and free two-day shipping. B&N failed to innovate and instead released a similar product for the same price as its competitor -- a strategy that will kill you every time.
Regarding his occasionally offbeat strategy, Bezos says, "I believe you have to be willing to be misunderstood if you're going to innovate." People tend to misunderstand what is new, as original ideas often are. However, shrewd investors know to look for the companies thriving amid market disruption.
From an investment lens, you could argue that Amazon's future growth is already factored into the current stock price. However, looking forward, I think Amazon's initiative to sacrifice short-term profitability for long-term growth will propel the e-tailer to new heights. For these and many other reasons, I'm giving Amazon an outperform rating on my profile in Motley Fool CAPS. But there's even more. You're invited to get this free report that reveals The Motley Fool's top stock pick for the year ahead. To unlock your free copy now click here.