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So Long As Amazon Dominates E-Commerce, Stick with AMZN Stock

Amazon (NASDAQ:AMZN) stock traded higher in late September on favorable results from a Bank of America survey. The survey found that 60% of consumers start their online shopping journeys on, while 49% of consumers do more than half of their shopping on

amazon (AMZN) logo on a corporate building
Source: Jonathan Weiss /

Those are pretty big numbers, and they jointly underscore Amazon’s unparalleled dominance in the e-commerce market.

The e-commerce market is going to be so big one day — because we are all rapidly pivoting to online shopping to streamline, accelerate and simplify the shopping process — that so long as Amazon dominates the market, its stock will keep going higher.

It’s really that simple.

And since Amazon’s chokehold on the e-commerce market today remains as tight as ever — with no signs of slipping anytime soon — I say stick with Amazon stock.

Amazon’s Unrivaled Dominance

Amazon is the unbeatable 400-pound gorilla in the e-commerce market.

In the 2000s, the company essentially leveraged its first-mover advantage, relentless focus on improving the customer experience and a novel online subscription shopping program through Amazon Prime to become the largest digital retail platform in the world. Throughout the 2010s, Amazon has continuously innovated and improved the customer experience — with things like free shipping and dynamic pricing — to sustain its market dominance despite a wave of new and formidable competition from Walmart (NYSE:WMT), Target (NYSE:TGT), Costco (NASDAQ:COST), and the like.

That’s why, despite these new market entrants, Amazon’s dominance in e-commerce is only growing.

According to the BofA survey, the number of consumers who start their shopping trips on increased year-over-year from 58% to 60%, while the number of consumers who do more than half of their shopping on also increased year-over-year from 47% to 49%.

In other words, this 400-pound gorilla is turning into a 410-pound gorilla.

That’s important because it basically shows that Amazon isn’t dominating e-commerce because they are the only game in town. Every business now sells online. Yet Amazon still dominates the market because they are the best game in town.

This evolution from “only” to “best” has added tremendous clarity to Amazon’s long-term growth narrative. For the foreseeable future, regardless of competitive dynamics, Amazon will leverage innovation, marketplace effects, and CX improvements to remain the No. 1 e-commerce player in the market.

To that end, Amazon stock looks like a long-term winner because the upside potential in e-commerce is enormous.

Huge Growth in E-Commerce

It seems like we’ve been talking about the digital shopping revolution forever. And we have. Yet, as of the second quarter of 2020, only 16% of U.S. retail sales happened online — and that number comes amid the peak of the Covid-19 pandemic when physical channels were largely shut down.

In other words, although the e-commerce market has come a long way over the past several years, it’s still has a lot longer way to go over the next several years.

This growth will mostly be driven by acceleration of e-commerce penetration in under-penetrated retail categories, like food (3.7%), auto (5.2%) and personal care (13.3%).

Fortunately, Amazon has a big presence in those markets. Amazon should be able to lean into its built-in marketplace effects and already established large Amazon Prime user base to rapidly grow its online food, auto and personal care businesses as those retail categories increasingly digitize over the next several years.

As that happens, Amazon will sustain huge growth in its overall e-commerce business, and Amazon stock will charge higher.

Other Upside Drivers

Of course, there are other upside drivers at Amazon which should not be ignored like cloud computing, advertising, and offline retail. Amazon runs the the largest public cloud infrastructure business in the world through Amazon Web Services, is scaling what will likely turn into the third-largest digital ad business in the world behind Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOG), and is redefining the physical shopping experience with things like cashier-less stores and automated checkouts.

There’s also the self-driving business, which — thanks to the recent Zoox acquisition — could enable Amazon to be the leader in providing self-driving logistics services. And then there’s the gaming business with Twitch and Luna.

Big picture: Amazon has its fingertips in every market that matters. But at the heart of all this growth is the core e-commerce platform. So long as that core e-commerce platform continues to fire on all cylinders, the stock will keep pushing higher.

Bottom Line on AMZN Stock

Don’t overthink this one.

Amazon stock is a long-term winner. Buy the stock on dips and hold it for the long haul.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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