Does anyone doubt that Amazon.com, Inc. (NASDAQ:AMZN) will soon take over the entire planet? Say what you want about Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) or even Twitter Inc (NYSE:TWTR) — there’s nothing quite like AMZN stock.
Please don’t misunderstand me — Facebook and Google are great companies, and Twitter’s social media platform is all the rage. But if there was only one stock you could own, I imagine most people would choose Amazon stock.
All of the above companies have radically changed their respective industries. Facebook changed the way normal folks interact with each other online. Google revolutionized internet search engines. Twitter invented the concept of “tweeting.” But only AMZN has consistently demonstrated success in one of the most difficult skill sets of the twenty-first century — parting Millennials with the contents of their wallets.
Remember the uproar a few years back when Facebook was supposedly thinking about charging their users a membership fee? Millennials demanded that they get their internet fix for free! Lost in the discourse was the fact that those rumors were absolute fabrications. Yet it goes to show you just how much of a tightwad the young generation is.
Amazon Go Will Definitely Move AMZN Stock
So when AMZN announced that they were diving into the grocery store business, a collective gasp must have erupted from every company that sells stuff.
Called “Amazon Go,” these are technologically savvy outlets that will eliminate one problem area of the industry — the checkout lane. In turn, AMZN stock will eliminate a key obstacle in the markets — the competition!
Utilizing artificial intelligence, the AMZN grocery store will dramatically reduce the need for a human headcount. As customers enter the store, they will have their smartphone scanned at a kiosk. From there, items that the customer puts into his or her basket will be automatically charged to their account.
According to company executives, the Go uses a similar technology that enables “Autopilot” driving in Tesla Motors Inc. (NASDAQ:TSLA) cars.
Of course, the advantage that AMZN stock has is that groceries tend to have lesser liabilities.
Groceries Make Sense for Amazon stock
The nagging question, though, is whether or not Wall Street will view this venture as a positive. Just because you can do something doesn’t necessarily mean it should or needs to be done. Indeed, Amazon stock is exposing itself to a serious risk. Why wade into enemy territory when e-commerce is your proven bread-and-butter?
For one thing, AMZN stock can better achieve higher growth rates by taking market share away from its rivals Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT). That’s an obvious point. But by contesting a secular business like groceries, AMZN stock can smooth out its revenue stream.
Based on recent financial information, the e-retailer’s holiday quarter revenue is roughly 45% to 50% above the average sales from the first three quarters. That may not always be desirable, since there’s a lot of pressure to perform on “Black Friday” or “Cyber Monday.” Amazon stock is clearly the leader in this area, so there’s limited worries for now. Still, if they come up short for one season, it’s a momentum drag heading into the next year.
But the most important reason why I believe Amazon Go — and ultimately, AMZN stock — will be successful is that management understands their customers. Let’s be real — the company isn’t going after bingo players. Millennials want convenience and AMZN is delivering just that.
Go’s checkout process is ingenious, not just for the efficiency but also because their target demographic prefers “cashless” transactions. Simply put, AMZN stock is sailing a very cohesive ship.
It’s hard to imagine anyone not getting excited. If there were lingering doubts about Amazon stock being long in the tooth, they just evaporated. Yes, it’s always tough branching into uncharted territory. However, AMZN stock has tremendous credibility — if anybody can pull it off, it’s them.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.