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  • A New Age Of Ecommerce Is Upon Us And Amazon (AMZN) Is Its Google (GOOG 0 comments
    Mar 2, 2013 3:16 AM | about stocks: AMZN, GOOG, WMT, BBY, BBBY, TGT

    In the world of data and the internet there are a few camps that say that Google is the most powerful company on the planet. There are some that say that Apple is. And that is really about it. This note however, would like to posit that there is a 3rd company that sits atop the axis of power in the new world of business. That company is Amazon.

    In much the same way that Google has revolutionized data, and Apple; consumer electronics, Amazon has been silently shifting the 'box' model of commerce in their favor. Shares are up nearly 50% in 52 weeks.

    Where is the future of Amazon heading? Amazon is on the path of taking over commerce, period. Although Amazon Prime began its life nearly 8 years ago in 2005, it has recently reached a new threshold of critical mass. Simply put, users are no longer utilizing conventional methods of shopping for items that have traditionally been immune to the rise of ecommerce. These items include household items such as soap, toilet paper, stationary, school supplies, and small-ticket drug-store purchases such as lotion, face-wash razor blades etc.

    The first wave of ecommerce destroyed brick & mortar demand for media, due to the medi-centric nature of the internet and Amazon's swift capitalization. The 2nd wave, the one we are currently at the tail-end of, destroyed the big ticket electronic market as retailers such as Best Buy, Radioshack, and Circuit City have fallen victims of. The third wave will be your Bed Bath and Beyonds, Target, Walmart and and CostCos. These large-box retailers for household goods and appliances have the biggest to lose in a world of downsizing.

    The catalyst for the shift in commerce has been the optimization of shipping and returns. With Amazon prime, all users are guaranteed free 2-day shipping. Unless you have an absolute immediate need for something in less than two days, the choice to make approximately two clicks for Amazon to ship you the product is more than clear. The market for items that have such immediacy is limited. In the case of products that constantly need replenishing such as toilet paper, medication, soap, etc, Amazon has introduced a feature that automatically ships you that item within a certain timed interval. In the case of items that are deemed too insignificant to ship, such as pens, stationary, and other ultra-small ticket items, Amazon has introduced the "Ships for free" feature that will automatically include that item in the box packaging on the next larger ticket item that you do purchase.

    The other catalyst has been the optimization of shipping. Full circle, has come the advent of efficient and optimized shipping. Though FedEx and UPS has always been the pioneers of proprietary shipping methods, the real growth and expansion of this sector, that has allowed Amazon to adequately expand operations without extreme dramatic shifts in its gross margin, has been provided by boutique shipping firms that have, over time, optimized its shipping strategies.

    These firms include OnTrac in the western and pacific states, Spee-Dee Delivery, Eastern Connection in the Eastern Atlantic states, and Lone Star Overnight in the south and Midwest. The launch of OnTrac Ground Service, which debuted the next-day and two-day ground service to Amazon in August 2011 has been heaviy utilized by Amazon to facilitate its shift in commerce.

    Amazon growth is the silent horse in the race for commerce in the 21st century. No other company has the tools to rival the empire that Amazon has built. In the coming years, as commerce shifts continue to evolve towards online, watch for Amazon shares to continue its ascent and shares in Target, Walmart, Bed Bath and Beyond and other big box retailers to recede.

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