How much have you bought from Amazon (AMZN 1.21%) over the past decade?
I just went back and checked. In 2009, my family purchased two items. Since then, we've ordered roughly 2,000 more. Diaper deliveries alone have made Amazon a godsend.
Its stock has also provided enormous returns. I called it my highest-conviction stock in 2012, and regularly pore over every word that founder and CEO Jeff Bezos utters. Shares have increased 1,300% over the past decade, making it a top stock to own.
Full disclosure: I have sold Amazon shares before because they had grown to be too large a position in my portfolio. But now -- for the first time ever -- I'll be selling shares because I'm losing faith in the company.
This has nothing to do with valuation, or the potential expansion into other industries. It's something much simpler -- and in the long run, more important -- that is bothering me.
A quick primer on the importance of mission
I've long said the only way someone from the 1990s could understand the evolution of Amazon is via its mission statement: "To be Earth's most customer-centric company."
That's the only common thread that leads a company from being a simple bookseller to an everything store/fulfillment network/cloud king.
If an organization's sole purpose is to maximize shareholder value, it will quickly grow stale. Employees need a bigger reason to go to work in the morning; customers want an emotional connection; and the statement needs to serve as a North Star.
Amazon's mission has worked like a charm. I vividly remember former Motley Fool contributor Morgan Housel posting on Twitter about his own experience.
My Amazon Fresh delivery was an hour late so they refunded the entire order plus a $20 credit.— Morgan Housel (@morganhousel) July 14, 2017
Shock and awe retention tactics.
That's what putting the customer first looks like. Everyone's happy as a result. Amazon became great because it was serving one -- and only one -- master.
How many masters now?
It started out as a small crack in the facade: advertising. Companies were willing to fork over high-margin dollars for ads. It was easy money: Take a customer's search query, and make the first few products on the screen "sponsored" -- which is another word for "advertisements."
From a purely business standpoint, this was great: high-margin dollars rolling in. But viewed through the lens of the mission statement, it raised a serious problem. Customers weren't the only master anymore. If the products displayed in your search weren't the best ones -- determined by the strength and veracity of customer reviews -- but instead "featured" products, was that really in the customer's best interest?
That's the question I asked back in April. My wife had mentioned this issue before as well -- so it registered, but didn't set off any alarms.
Which brings us to this holiday season. When it came time to select presents via the internet, Amazon.com was my first stop. A few hours later and I was completely disillusioned. Among the issues:
- Advertisements: Sifting through what was an advertisement and what wasn't took a lot more energy on my part than I wanted to spend.
- Trust: Because third parties now provide so much of the stuff sold on the site, it's very hard to know whom to trust. Some providers don't even have their own website.
- Reviews: I had to spend copious amounts of time going through reviews, trying to determine if a company had sent a bunch of people to leave "fake" reviews, or if they were genuine.
- No good solutions: Even when I tried to filter for the top products (via reviews) to be displayed, those with less than 10 reviews came right to the top.
It was all enough to make my head spin.
We left the situation with a very clear takeaway: Under no circumstances is this a customer-centric experience...let alone "Earth's most customer-centric" experience.
Why I'm selling some -- but not all -- of our shares
Whenever I buy a stock, I write down what would have to happen to make me want to sell. Abandoning a mission is one of them. Thus, when Motley Fool trading rules allow, I'll be selling shares.
But I won't be selling all of them. When all is said and done, Amazon will still be about an 8% position for me (it's currently at 17%) -- my third largest. Why would I hold on to shares?
It's important to make allowances for things that I can't know. Among them:
- Amazon could be well aware of these problems and trying to fix them as we speak.
- My experience (and that of my wife) could be an anomaly. The majority of users might be perfectly happy.
- Bezos is easily one of the most successful and creative businesspersons of our time.
There are probably even more reasons, but hopefully you get the idea. I still think it's worth having skin in the game with Amazon. It has a powerful brand, a network of fulfillment centers that's unmatched, benefits from the network effect, and history of innovation.
But more than anything, it has moved down a notch in my mind. What I once considered a sacred holding -- one I'd never touch unless I absolutely had to -- is just a good stock to own now. I'll keep some shares, but only truly amazing companies deserve more than 10% of any portfolio.
For me, Amazon's no longer in that league.