Dan Burrows, Amazon
With Apple, an uncompromising visionary married first-in-class software with unparalleled industrial design to create an addictive, almost frictionless experience for consumers just as the digital media revolution was taking off. Red-hot growth and remarkable profitability was the payoff.
There’s perhaps no other company that’s even a close analog to Apple, but when it comes to cashing in on the digital future, you’ve got to repsect Amazon (NASDAQ:AMZN). Founder Jeff Bezos, like Steve Jobs, is an uncompromising visionary who takes the long view. Since Amazon’s inception, he has been unshakeable in his (very costly) determination to build an empire, quarter-to-quarter report cards be damned.
Also, like Jobs, Bezos is laser-focused on the consumer experience. When it comes to online retail, Amazon is the best place to shop on the web. It has the largest selection, best interface and, by most accounts, peerless customer service. Is it any wonder Amazon is crippling Best Buy (NYSE:BBY), which is rapidly becoming a mere showroom?
Amazon also is well-positioned on the battlefield for dominance in the Cloud-based digital future. The Kindle e-reader is a runaway success, and early iterations of the Kindle Fire have so far offered the only real alternative to Apple’s iPad. With its vast library of movies and shows, Amazon could yet emerge as the dominant vendor of streaming media.
Meanwhile, Amazon’s “core” business still offers a mountain of opportunity. E-commerce retail sales still represent less than 10% — and perhaps as little as 5% — of total U.S. retail sales. There’s no shortage of market share to grab.
True, where Apple charged premium prices and reaped premium margins, Amazon is all about low margins and scale. Like Wal-Mart (NYSE:WMT) during its epic domestic growth phase, Amazon is all about volume, volume, volume. The prospects for Amazon’s share price in the near term are constrained somewhat by Bezos’s margin-squeezing empire building. But then, remember, he’s taking the very long view.
AMZN earnings are forecast to grow at a 33% annualized rate over the next five years. As Bezos’ empire reaches the frontiers of its ambition, shares ultimately could deliver Apple-like returns.