Amazon.com, Inc.‘s (AMZN) stock price has never really been what one might call “stable” over the years.
In the dot-com boom, AMZN split three different times, in what amounted to a 12-to-1 split, in 15 months. It went from a dollar and change per share to nearly $100/share at the peak of the bubble.
Then, of course, it all came crashing down, and by 2001 it was under $7/share. Fast forward to the beginning of 2015, and it’s $300/share. Fast forward to today ($597) and … well, you get the story.
There’s a reason the Amazon stock price is so volatile: Since the beginning, it has been a high-growth company with massive ambitions that tend to take it in many different directions, some of which are unpredictable, and many of which are unprofitable or breakeven.
Amazon’s ambitious roots are the reason why products from Starbucks Corporation (SBUX), PepsiCo, Inc. (PEP), and Procter & Gamble Co (PG) may play a major role in AMZN stock’s next rip-roaring rally.
AMZN Is Speeding Up Commerce
If you’ve ever taken an economics course, perhaps you remember a term called the “velocity of money.” It’s a measure of how quickly money moves from one transaction to another, and typically an economy with a high velocity of money is developed. All things equal, it can help a country grow and boost inflation.
The introduction of PayPal Holdings Inc (PYPL) for instance, helped increase the velocity of money in the U.S. You buy a pair of kitten mittens online, send your payment digitally, it clears, and then the seller can use that money to re-stock his kitten mitten inventory. It moves the economy along and helps the kitten mitten merchant thrive.
What’s this got to do with AMZN? Well, just like digital payments sped up commerce, so too will the newly introduced custom of automatic and one-click reordering of consumer goods. That’s where SBUX, PEP and PG come into play.
Each company just introduced products that will be a part of Amazon Dash Button, which more than tripled the number of brands participating in its one-click reorder service today.
Prime members can buy a certain brand’s Dash Button for $4.99, and are sent a physical button with that company’s brand on it in return. They set it up online so that whenever they click the button, the product of their choice is reordered (always with free shipping).
After your first use of the Dash Button, you get a $4.99 credit to your Amazon.com account, so the button itself is essentially free if you use it.
Procter & Gamble products currently account for 31% of sales through the Dash Program, according to Fortune. SBUX added the “Starbucks Doubleshot Coffee” button to the program today, and PEP is gushing at the opportunity this program offers, according to today’s AMZN press release:
“PepsiCo is always looking for new and innovative ways for shoppers to engage with our brands…the Dash Button was one of those unique opportunities,” said David Orr, Global Customer Lead, PepsiCo. “We have been very pleased with shopper feedback and engagement since the launch and look forward to expanded learnings moving forward.”
Yet again, Amazon is pushing the boundaries, innovating and reaping the rewards.
Its Dash Replenishment Service takes things a step further than the Dash Button, and “enables connected devices to order physical goods from Amazon when supplies are running low.” About a month ago, I raved about one of the new additions to AMZN’s DRS program, a Brita water pitcher that reorders a new water filter when your current one is almost worn out.
At the end of the day, SBUX, PEP, PG and many other companies are teaming up with Amazon for their own self-interest — while also boosting the velocity of money and likely increasing Amazon’s revenue. Don’t be surprised if AMZN stock follows suit.
Sounds like a win-win to me.
As of this writing, John Divine was long AMZN. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
