Amazon Proves Again It's the World's Best Retailer

There is something magical about following a company that's firing on all cylinders. It's similar to watching Lebron play ball. The moves are not necessarily delicate, nor are they terribly fancy -- but once the wheels get rolling, there's no stopping it. Companies like these appear to do no wrong -- and that's often the case. It's as if the stars aligned with management and consumers to create a revenue-generating Promethean-like corporation that will dominate its industry until someone finds a way to defeat it. For Amazon.com (Nasdaq: AMZN  ) , consider the stars aligned.

How you like me now?
The company needs no sort of introduction. You used Amazon this morning to get a new office chair for 70% less than any Office Depot on Earth could offer you. While you were at it, you went ahead and bought the Alfred Hitchcock Collection on Blu-ray and an anniversary present for your wife, and you did it all with one-click ordering.

While it came to us under the guise of an online seller of books, which I have been led to believe were a collection of ancient scrolls used by cavemen before the advent of Wikipedia and Gawker, Amazon sells absolutely everything you want and usually don't need. In addition to selling you things, Amazon now sells you services -- from hosting to streaming video. This year, the company bought an army of robots to manage its distribution warehouses. Seriously. This is as close to the future as we can get right now.

Though one issue that has plagued the retailer since its inception is delivery logistics. The task is to deliver products in the safest, quickest, most economical, and most efficient way possible -- in other words, a total nightmare. The company has tried to address the "failed delivery" issue, but it seems to have now circumvented the problem. Introducing: Amazon Lockers.

Just like middle school ...
Instead of a school pod, an Amazon Locker is something you find at your local drugstore or supermarket. Well, maybe not yet, but Amazon is in the process of installing Locker locations across the country, with 50 existing sites already in New York City, Washington, D.C., and Seattle.

Think of these as similar to Wal-Mart's (NYSE: WMT  ) "ship to store" option for online checkouts. To avoid any delivery malfunctions (not there to sign for the item, privacy issues, theft), users will soon be able to have their products shipped to an Amazon Locker, free of charge, where they can pick it up with a unique code emailed to them upon purchase. This is Amazon's latest way of saying, "Sorry, bricks-and-mortar retail, but anything you can do, I can better."

All-around win
The Amazon Lockers not only slim down the fading advantages of physical retailers, but moreover they will save Amazon a good bit on shipping. According to an article in The Wall Street Journal, Amazon pays a hefty premium for shipping to residences via UPS (NYSE: UPS  ) . In fact, the shipping companies charge up to 20% higher to Amazon for the service, as it is much less expensive to drop off multiple packages at a central location. Amazon has felt the burn, with order fulfillment numbers going from $941 million in the second quarter last year to $1.36 billion this year.

When a package isn't successfully delivered, everybody hurts. Customers call and yell at UPS and Amazon representatives and often switch to competitors for future purchases. With the Amazon Locker, the company is solving some serious issues in one simple action.

This comes in the same year that Amazon is massively expanding its streaming video service to take on Netflix (Nasdaq: NFLX  ) . Included in the value-driven Amazon Prime service ($79 a year for free two-day shipping along with special offers) is a less populated but certainly growing collection of movies and television shows. Most important at this point is that it undercuts Netflix on price by a minimum of $16 a year.

Content costs and offerings will determine who offers a better service, but Amazon has a lot more going on to cushion any potential fallout from the still uncertain business model.

Just a taste
Amazon Lockers and Amazon Prime are just two examples of why I believe your money is well housed in this retail company. Despite Amazon's foray into streaming and hosting, it is still, at its core, a retail operation. If the streaming is of particular interest, it may be worthwhile to look at the more focused play, Netflix. Our analysts have forecasted Netflix over the next year and highlighted the good, the bad, and everything in between. Check out the premium report on Netflix.

Fool contributor Michael Lewis owns none of the stocks mentioned above. You can follow him on Twitter, @MikeyLewy. The Motley Fool owns shares of Netflix and Amazon.com. Motley Fool newsletter services have recommended buying shares of Netflix and Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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