Shares of Amazon (NASDAQ:AMZN) are the ideal long-term investment for many reasons. Here are 12 that come to mind.

1. Ideal corporate culture

Amazon's culture is one of invention and pioneering. Rather than be content with being an online bookseller, founder and CEO Jeff Bezos expanded the business into music and then general merchandise. But Bezos's ambitions didn't stop there. Amazon expanded overseas, developed the third-party marketplace business, invented the Kindle e-reader, and launched Amazon Prime.

Over time, it expanded into an array of businesses and venture-type projects including global logistics, drone delivery, and healthcare, and has created new industries, including the Echo smart speaker and the Amazon Web Services ("AWS") public cloud computing business. 

None of these remarkable successes were achieved without the risk of failure. In fact, Amazon has failed at many things. High-end jewelry, online travel, and the Fire phone are just a few examples. But Amazon tolerates failure because it knows it probably isn't being innovative enough if it isn't failing at something from time to time.

That's what makes Amazon's culture truly special, and has been the key enabler of its jaw-dropping value-creation machine over time. In contrast, most companies stick to their core business and lack a culture that tolerates broad experimentation, innovation, and risk-taking. 

An Amazon Prime Air cargo jet flying through the air.

Image source: Amazon.

2. Long-term e-commerce growth

It may surprise some, but e-commerce in the U.S. still only accounted for 11% of retail sales last year. That will increase substantially over time as the population changes toward more people who grew up with online ordering. That will continue to put pressure on physical retailers, which will continue to close, which drives more spending to online channels.

Bank of America's Justin Post estimates Amazon's market share of U.S. e-commerce is about 44%. If Amazon has a 44% share of the e-commerce market, which itself has an 11% share of U.S. retail sales, Amazon would have about 5% market share of U.S. retail sales. That will almost certainly increase over time, and there's a lot of upside just in 5%.

3. Core e-commerce business has a massive moat

While Amazon has many online retail competitors, it's virtually impossible to penetrate Amazon's e-commerce moat. One of the largest components of that moat is Amazon Prime, which has over 150 million members globally and an estimated 100 million or more in the U.S. The brilliance of Prime is that it provides members with free two-day, and increasingly free one-day, shipping. Since members have already paid for it, they tend to want to get their money's worth, which makes Amazon the first place they go for most online purchases.

The company's buying power, fulfillment and delivery infrastructure, and enormous third-party marketplace, which accounts for over 50% of units sold, further widen Amazon's moat.

4. Long-term public cloud growth

AWS is already a $41 billion annual revenue run-rate business, still growing 33% year over year, but it's just getting started. AWS boss Andy Jassy believes the business is addressing the $3.7 trillion global IT market, of which only 3% of has migrated online so far. That implies massive long-term opportunity ahead.

5. AWS has a scale-driven moat

Public cloud computing is a scale business. If a competitor doesn't have substantial revenue scale, it's impossible to justify the massive investments in data centers and engineering talent required to rapidly innovate and add features to delight customers. That's why the public cloud market has consolidated to three players: No.1 player AWS, No.2 Microsoft Azure, and No.3 Alphabet's Google Cloud Platform.   

6. Just getting started in digital advertising

Alphabet and Facebook have dominated the digital ad market, but Amazon is now the clear No.3 player in the U.S.  Amazon's Other net sales line, which is mostly made up of its ad business, grew from under $3 billion in 2016 to over $14 billion last year. And it grew an impressive 44% year over year last quarter. eMarketer estimates the global digital ad market size at $384 billion last year and $518 billion by 2023. This is clearly a big market, and Amazon has been gaining market share. 

A customer picks up an Amazon package from an Amazon Hub.

Image source: Amazon.

7. Accelerating shipping speeds

Last year, Amazon began converting Prime's shipping benefit from free two-day shipping to free one-day shipping. That investment cost the company billions, depressing current profit margins, but it's likely to pay off in a big way. There are many situations where people who need something are willing to wait for one-day shipping, but would go to the store if it would take longer. That was beginning to drive faster e-commerce sales growth over the last few quarters. 

Amazon now also offers free same-day grocery delivery from Whole Foods in an increasing number of markets around the U.S. and has been overwhelmed by demand due to the COVID-19 pandemic. That's driving trial of Whole Foods delivery, and some of those customers will remain active customers after the pandemic is over. 

8. Groceries

In Brad Stone's best-selling book about Amazon, The Everything Store, Jeff Bezos is quoted as saying: "In order to be a two-hundred-billion-dollar company, we've got to learn how to sell clothes and food." Food, in particular, is a massive market in the U.S. According to the U.S. Census, food and beverage stores were a $746 billion market in 2018 -- over 14% of the $5.3 billion of retail sales.

That explains Amazon's interest in acquiring Whole Foods in 2017 and its other grocery store initiatives, including Amazon GO Grocery.

9. Global logisitics

Amazon has grown to a scale where it made sense to lease its own cargo jets, deploy its own trucking fleet, sail its own container ships from Asia, and increasingly fulfill its last-mile deliveries with its own delivery vans. These efforts lowered the company's variable costs, which frees up cash for it to reinvest in other initiatives. Amazon also quietly began offering its delivery infrastructure as a service by shipping third-party parcels in direct competition with carriers UPS and Fedex

10. Healthcare

Amazon has big ambitions in healthcare as well. One of its first efforts came in 2018 when it acquired online pharmacy business Pillpack for $753 million. It also has a major healthcare cost savings initiative underway in partnership with Berkshire Hathaway and J.P. Morgan.

On Amazon's first-quarter conference call, management mentioned it was investing several hundred million dollars in COVID-19 testing capabilities for its employees. But knowing Amazon, it'll likely look for an opportunity to leverage those capabilities to offer testing as a service to others.

11. Long-term margin potential

Amazon has tremendous potential to improve its profit margins over time. This is because its margins have been depressed at a lower level for longer than perhaps any company in history. That's because Amazon reinvests huge sums back into its own businesses and venture-type initiatives.

It has been aggressively reinvesting in fulfillment centers, sortation centers, geographic expansion, including billions in India, category expansion, faster shipping speeds, a wide variety of devices, drone delivery technology, artificial intelligence, machine learning, smart speaker technology, data centers, and constant hiring of new employees. On top of that, Amazon is almost certainly investing in all sorts of initiatives we don't know about yet. Much of that investment spending runs through Amazon's income statement, reducing reported profits and profit margins.

As Amazon harvests this investment spending over time, its margins should improve. But counterintuitively, the more Amazon reinvests and for longer -- and consequently depresses its near-term margins -- the larger and more valuable it's likely to be over the long term.

There is also a favorable mix shift toward its high-margin advertising and AWS businesses, which are growing faster than the overall company. 

12. Jeff Bezos is in charge

It's remarkable what Jeff Bezos has done turning a start-up online bookseller into the global giant Amazon is today. Especially impressively, Amazon has come to dominate two completely different businesses -- e-commerce and public cloud computing. Warren Buffett has even called Bezos "the best CEO in America" and he's absolutely right. That's just another reason investors should buy Amazon shares and never sell.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.