Amazon.com (AMZN +0.30%) is an e-commerce powerhouse that has continually expanded its footprint from its early days of selling books online to now selling nearly everything from beauty products to car parts. Last year alone, Amazon brought in an eye-popping $136 billion in revenue, and 43% of all e-commerce sales in the U.S. were completed through Amazon's website, according to Slice Intelligence.
By 2021, Amazon is expected to take at least half of all online sales. The company has built out its e-commerce dominance mainly from selling tons of items at cheaper prices -- and with faster delivery -- than its competitors. That means the products, and how many of them it sells, are very important to the company.
That's why investors should take note that for the past two years, Amazon's own products have topped its best-seller list -- and this year, its devices appear poised to do the same.
Image source: Amazon.com.
The current leaders and past winners
Amazon keeps a running tab of the best-selling items on its website. It's a pretty comprehensive list with everything from video games to books to clothing. For example, the best-selling toys right now are rocket copters that you can fling into the air and the best-selling book is Hillbilly Elegy. The list gets updated each hour, so the items change frequently. But one list that rarely changes is the top-selling devices in the electronics section.
Amazon's own Fire TV Stick is currently the best-selling item in that category. In fact, Amazon's own devices -- from its tablets to Echo speakers -- consistently account for eight of the 10 best-selling electronics devices.
That's notable because for at least the past two years, Amazon's own devices have been the best-selling products on its website. In 2015 it was the company's 7-inch Fire tablet that topped the list, followed by the Echo Dot in 2016.
We're only halfway through 2017 right now so there's plenty of time for another item to top Amazon's electronics list. But if the past few years are any indication, the company may be on track for another year of having the best-selling item.
Why this matters to Amazon
Amazon's not interested in its products gaining a spot at the top of the best-seller list because it makes tons of money from them. The company typically sells its devices at-cost, or even at a loss. The bigger picture is that Amazon uses its products as a catalyst for selling more items on its website, and for hooking users into its ecosystem.
Research over the past few years shows that the more devices Amazon sells, the more likely people are to use them to buy products from its website. In 2013, a report noted that Kindle-reader and tablet owners spent about 55% more money on Amazon than non-Kindle owners. And in 2016, Amazon Echo owners were found to spend 10% more money on Amazon than they did before they owned the device.
A recent report put out by RBC Capital estimates that there will be an installed-base of 128 million Alexa-powered devices (like the Echo speaker and Echo Dot) by 2020, and that they'll become a $10 billion business that year. Those estimates are based on the assumption that Alexa-powered devices will increase spending by 5% to 15% for each Amazon customer.
Amazon won't announce the best-selling product of 2017 until early next year, but for now investors can take note that the past two years Amazon's products outsold everything else, and this year its electronics are easily topping the list again. That's a strong signal of Amazon's ability to continually keep customers tied to its ecosystem.
