Amazon.com, Inc. (AMZN) is an international e-commerce behemoth that, in its 20-plus years of existence, has gone from a small online bookstore to a $280 billion tech giant.
For AMZN stock to thrive, though, the company needed a cutthroat CEO in Jeff Bezos, and Amazon’s path to success is lined with corpses of competitors: Borders, Circuit City and RadioShack all fell to the ruthlessly efficient sword of Seattle’s pride and joy.
Watch out German retailers … you’re next.
AMZN Begins 2-Hour Delivery in Berlin
According to the German newspaper Welt, Amazon is doubling down on Berlin, planning to establish a fulfillment center on Kurfuerstendamm, the prominent avenue running through Germany’s capital.
The move is part of Amazon’s ambitious plans to offer a two-hour delivery service in Berlin, a city of 3.5 million people as of 2012. Deliveries would begin in May, reports Reuters, and would use existing German courier firms operating in Berlin.
In doing this, AMZN isn’t just going up against local German retailers. Reuters explains:
“Until now, Amazon has mostly used Deutsche Post’s DHL parcel service for deliveries in Germany, and its move to build up its own delivery capabilities is seen as a threat to DHL’s business.”
Sound familiar? Amazon’s doing the same thing in the U.S., where it is buying fleets of trailers and leasing airplanes to take delivery into its own hands and cut out FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS).
Geography-wise, Germany is the second-largest driver for AMZN stock, behind the obvious front-runner, the U.S. In 2015, Amazon posted revenue of $11.8 billion in Germany, or 11% of its overall revenue. That’s easily larger than the UK ($9 billion), Japan ($8.3 billion) and the “Rest of World” segments ($7.4 billion).
Given that total German spending on e-commerce is expected to clock in at $82.9 billion in 2016, it’s no wonder AMZN is devoting resources there. Frankly, it makes $11.8 billion seem like peanuts.
What This Means for Amazon Stock
Another thing that could have impacted the timing of Amazon’s Berlin blitz: The U.S. dollar has lost some ground recently, and is actually weaker than it was to begin the year against the Euro. At the start of 2016, one Euro was worth $1.086; today it’s worth $1.121.
That should make for a nice year-over-year boost to AMZN’s international revenues, and if the trend continues, now is certainly the right time for overseas expansion initiatives like this one.
When Berlin is exposed to the wonders of two-hour delivery, I expect more and more Germans to join Prime (one assuming a $99/year Amazon Prime membership will be required), providing AMZN with not only a stream of recurring revenue, but devoted new customers.
A 2015 study found that Prime members spent $1,500 on Amazon compared to $625 for non-Prime members. Given the fact that Germany’s population is about 80 million, and the country is projected to spend nearly $83 billion on e-commerce this year, that makes for an average of more than $1,000 per citizen.
Bottom line? There’s money to be milked from the German market, gosh darn it! Amazon knows that, and is intelligently moving to seize the opportunity. AMZN stock owners, myself included, should be pleased.