I'm an Amazon Prime (NASDAQ:AMZN) member in Spain. The cost over here is far cheaper than the US, where we pay around 20 euros a year for an annual membership, but obviously we would not have the same level of services that a Prime membership in the US entails. Things are changing though in international markets for Amazon. This was the summary of a letter which came through my letterbox just recently.
Dear Client,
Arrive home late and nothing prepared for dinner? Forget to buy that present for that pending birthday? Prime Now is here to help you.
As a customer of Amazon Prime, you can enjoy Prime Now, the ultra-rapid delivery service from Amazon.
In Prime Now, You can pick between 20,000 available products with a wide selection of fresh foods, drinks, beauty products and medicine as well as articles in sport, toys, video-games or the latest trends in electronics.
We deliver every day of the week from 8am until mid-night. We deliver your order free of charge within a 2 hour window which you choose or alternatively deliver it within one hour (NOW) for an additional charge.
I wrote about Amazon recently, and went through how one could get long this stock through the use of long-term call options or leaps. The article takes a different stance and discusses whether there could be a possible tipping point of Amazon Prime growth in the near future. Let's discuss.
The statement the company wanted to convey in the above message was the convenience trump card. Prime Now should go down a treat in Spain. Why? Well, it's well known that the Spanish work long hours - often way more than the standard 35-40 hour work weeks we see in other European countries. Furthermore, I live in an apartment complex with no defined concierge. Up to now, it has been hit and miss whether I would be at my address when the deliveryman came. Now with Prime Now though, I can specify when I want the parcel delivered. This will be another potent sting to Amazon's bow for many customers who prefer not to use dedicated delivery points for their goods.
The road map, to a large extent, has been written already for Prime, thanks to the success it has garnered in the North American market. When one strips out AWS and Whole Foods, revenue is split around 64% / 36%, with 64% coming from the North American market and 36% from International markets. Amazon will keep on doubling down on reduced shipping times, lower prices, a wider selection and more services as part of Prime worldwide. Price increases for Prime invariably follow. Although infrastructure may have slowed of late (when looking at fulfillment center growth), the huge growth of Amazon Prime in India, for example, demonstrates that the service is light years away from any inflection point with respect to top line growth.
However, the moral view may come into the equation here sometime soon. Many investors put their hard-earned money behind companies which are adding huge value to society. Whether it is healthy food companies or the likes of renewable energy companies, many investors back stocks which are improving the human race in general.
Now, core Amazon investors would state that the company has and continues to help small businesses in droves with respect to the selling of their wares through its online portals. Third-party sales is a bright spot for Amazon, as the massive retailer is quick to point out that more third-party sales were recorded than Amazon sales last year. However, that's only one point of the argument.
The other is this. What about the local bike shop or the local fruit store which fails to sell its wares online? I have neighbors that want local services on their doorstep, which is why they continue to support these shops. Amazon, though (for a fee), can have goods to you within an hour without you having to leave your home.
I grew up in Ireland, and I still remember distinctly how my parents at the time were encouraged to "Buy Irish". Amazon gets around this problem by sourcing goods from the countries it operates in. It's only a matter of time though before we will see "Buy local" signs in many rural communities. In an age of mass technology, we're about to find out if communities will put people and businesses before profit and convenience. Which way do you see this going?
