Why It's Prime Time for Amazon Stock

Amazon (NASDAQ: AMZN  ) stock could finally get the lift it deserves if the company's expanding grocery business is a hit. However, Amazon will need more than fresh produce to grab a meaningful share of the $568 billion U.S. grocery market. Fortunately for Amazon shareholders, where success in groceries is concerned, the e-tailer isn't leaving a lot to chance.

That's where Amazon Prime Fresh comes into the mix. In an apparent bid to replicate the success of its original Prime shipping program, Amazon recently announced a new version of the service called: Prime Fresh. As a regular Prime member, I get unlimited two-day shipping from Amazon.com for just such $79 a year. However, Prime Fresh now offers customers unlimited same-day and next-day shipping on more than 500,000 products and groceries for $299 per year.

So what?
This new offering is exciting for a few reasons. First, Amazon already has the logistics and infrastructure in place to easily pull off same-day delivery, whereas grocery retailers like Whole Foods (NASDAQ: WFM  ) lack the resources necessary to offer grocery delivery at Amazon's scale. This could be a problem for Whole Foods down the road if Amazon Fresh expands nationally, particularly since Amazon Fresh offers a wide selection of organic and locally sourced produce.

Amazon's Prime Fresh could also be a catalyst for the stock if enough customers opt into the program. Consider this, "Prime customers spend more than twice as much annually on Amazon than non-Prime customers," according  to Wired.

This should play out even better for Amazon, thanks to its new annual membership fee. Think about it: Customers who pay the $299 for Prime Fresh are going to make sure they get their money's worth in same-day and next-day shipping -- and how do they do that? By ordering more frequently from Amazon.com. Looking ahead, I suspect Amazon's Prime services will play a key role in the future success of Amazon stock.

Should you be a buyer?

Everyone knows Amazon is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.


 

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