4 Basic Reasons for's Ongoing Success

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now (NASDAQ: AMZN  ) has been on quite a run in recent years. By focusing on developing businesses as diverse as selling pet supplies and providing cloud computing services, has rapidly grown revenue at an astounding rate and is well on its way to surpassing Wal-Mart (NYSE: WMT  ) as the world's largest retailer within the next decade. As noted in the table above, is closing the gap on Wal-Mart through tremendous revenue growth rates:

AMZN Revenue (Quarterly) Chart

AMZN Revenue (Quarterly) data by YCharts

While Wal-Mart has grown revenue a respectable 77% over the past decade, has increased revenue in excess of 1,000% over the same period. There are remarkably simple forces behind this growth.

Market disruption
While brick-and-mortar retailers like Wal-Mart and Best Buy (NYSE: BBY  ) occasionally change the brands or product categories available in stores, the big-box retail concept has been largely stagnant over the past decade. In contrast, is constantly innovating and finding new ways to deliver product while simultaneously increasing customer satisfaction. Examples are numerous, including Amazon's flagship line of Kindles, Amazon Prime two-day shipping and video streaming (on a free, rental, and sale basis). Looking ahead, continues to find ways to make the consumer experience easier with experimentation in grocery delivery, anticipatory shipping, and even delivery by drone. CEO Jeff Bezos has a vision of a time when his company prepares to dispatch a drone to deliver products before you even realize that need to order them.

Continuous improvement in a competitive environment that is largely standing still provides a huge competitive advantage for

Through heavy investment in expansion, efficient use of inventory thanks to a lack of brick-and-mortar storefronts, and thousands of third-party affiliates, has an unmatched array of brands and products. A customer looking for a diverse basket of goods including golf clubs, a big-screen television, gourmet jelly beans, and a designer handbag are going to be hard-pressed to find these items elsewhere with free shipping, let alone a single store that has each item and the ability to deliver it the next day. This variety and convenience makes the default place to start any online shopping.

Price benefits from a cost structure that does not require the ongoing operation of thousands of expensive storefronts. No need to staff, operate, and renovate stores that often come at a steep price for the best locations. Combined with the company's longer-term focus that isn't weighed down by short term margins, can offer the same products at equal or lower prices than the competition while still providing the convenience of fast delivery.

Very simply, this is the reason behind the plunge in Best Buy shares earlier this month. Best Buy went "all-in" on the holidays by offering price matching and inviting "showrooming" as a way to generate traffic. All signs point to this gamble backfiring on Best Buy in terms of lower margins outpacing any sales benefit.

Long-term focus
The brick-and-mortar origin of many retailers is accompanied by baggage in terms of cost, culture, and mentality. Rather than being tethered to quarterly margins and same store sales results, Bezos and's management team are focused on the long-term. This is evident not only in the billions of dollars spent investing in future expansion, but also in the company's philosophy. The annual letter to shareholders is a fantastic read, and in management's eyes the company is still in "Day 1" of its growth.

Customer focus
Disruptive products, selection, price, and long-term perspective are all strengths for What the makes the company truly exceptional is the way in which Bezos and team bring these basic concepts together with a singular focus on the customer.  Bezos' most recent letter to shareholders captures how these strengths translate into a customer focus that keeps ahead of other retailers:

"One advantage – perhaps a somewhat subtle one – of a customer-driven focus is that it aids a certain type of proactivity. When we're at our best, we don't wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to. We invent before we have to. These investments are motivated by customer focus rather than by reaction to competition. We think this approach earns more trust with customers and drives rapid improvements in customer experience – importantly – even in those areas where we are already the leader."

While some investors look at's sacrifice of short-term results with skepticism, the company's share price over the past decade shows just how much value the market places on this unique perspective:

AMZN Total Return Price Chart

AMZN Total Return Price data by YCharts

Foolish takeaway
If today is truly "Day 1" for, there is little reason to doubt that further market outperformance is in the company's future. With innovation, investment, selection, price, and service continuously improving the customer experience, is truly a one-of-a-kind retailer. Over the long-term, this value proposition to customers will continue to result in market share gains; while it may be secondary in the minds of management, this ongoing growth will translate directly to further share appreciation for investors.

More great stock picks from The Motley Fool
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2807561, ~/Articles/ArticleHandler.aspx, 9/1/2015 10:25:33 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Brian Shaw

Brian is a contributor to The Motley Fool that seeks to translate the investing wisdom of Peter Lynch and other investing legends into timely coverage of consumer goods companies.

Today's Market

updated 1 hour ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 3:59 PM
AMZN $496.54 Down -16.35 -3.19% CAPS Rating: ***
BBY $35.44 Down -1.30 -3.54%
Best Buy CAPS Rating: *
WMT $63.82 Down -0.91 -1.41%
Wal-Mart Stores CAPS Rating: ***