It's been a busy year so far for Amazon.com (AMZN -1.64%). The world's biggest online retailer has been in full press mode since the start of 2014 as it attempts to take a bigger share of the video streaming market and build out the Amazon ecosystem. It's in this spirit we'll look at three reasons for investors to love Amazon in the year ahead.
New hardware enables Amazon to sell more services
Unless you've been living under a rock, you know Amazon recently released its Fire TV device for streaming video content. This sleek gadget costs $99. However, for the e-tailer, it's not about hardware sales, but rather selling more digital content to consumers. With Fire TV, users get instant access to over 200,000 movies and TV shows not only from Amazon Instant Video but also from third-party apps like Netflix and ESPN.
Moreover, with innovative features like voice-activated search and Advanced Streaming and Predictive controls, Amazon's Fire TV should give Apple (AAPL 1.27%) TV a run for its money. Fire TV is the same price point as Apple TV, yet unlike with Apple's device, users often won't need to wait for video content to buffer or load. That's because Amazon's gadget uses ASAP, or Advanced Streaming and Prediction, so that your favorite shows or movies are ready to view as soon as you push Play.
Apple currently dominates the U.S. streaming device space with 43% market share. However, that could change now that Amazon has its own hardware available for connecting consumers with Amazon's growing media ecosystem.
Prime price hike helps Amazon control costs
Another reason investors should love Amazon these days is the company's recent announcement that it will now charge $99 per year for its Prime subscription, up from $79 a year. This may not seem like a lot to pay from a value standpoint because you're getting unlimited free two-day shipping on millions of products, as well as unlimited video streaming of 40,000 movies and TV shows and access to free e-books from Amazon's Kindle Owners' Lending Library.
However, for the e-commerce giant, increasing the cost of Prime by just $20 should help Amazon better control costs going forward. Rising shipping costs continue to weigh on Amazon's bottom line. In fact, delivery expenses swelled 19% to a whopping $1.21 billion in Amazon's fiscal fourth quarter.
Nevertheless, Amazon reportedly has more than 20 million users paying for its Prime service today. Therefore, even this modest price hike of $20 per member, per year, could add upward of $400 million to the online retailer's bottom line.
Fresh thinking has consumers turning to Amazon while offline
AmazonFresh, the company's grocery delivery service, provides consumers in Southern California, Seattle, and San Francisco with same-day and early-morning delivery of fresh groceries, everyday essentials, local products, and items from Amazon.com. The service may only be available in select markets today, but its new Dash device is making headlines around the world. Amazon Dash connects to a customer's home Wi-Fi network so they can scan the barcode or speak the name of grocery items into their Dash device. These items are then added to a list in their AmazonFresh account.
Source: Amazon.com.
Amazon's new Dash device now makes it even easier for AmazonFresh subscribers to create shopping lists without having to log in to the service online. While some analysts view the device as gimmicky, I believe this is a smart way for Amazon to get more customers to make more Amazon purchases. It's also another example of how Amazon is building out hardware (think Fire TV) that basically acts as point-of-sale devices for customers to access and buy everything from groceries to e-books faster than ever.
Profits in the making
Together, these three things are making it faster and more convenient for people to make purchases within the Amazon ecosystem. Down the road, this should help Amazon steal market share from competing media ecosystems such as Apple's. After all, we're already seeing Amazon make headway in the online streaming arena. In fact, Amazon's video-streaming usage has now surpassed both Apple's and Hulu's, according to research firm Qwilt.
