How Amazon Stays Dominant

A great man once said, “If you're not first, you're last.”

That man was Reese Bobby. 

OK, so he's not really a great man. And really, he's not an actual man at all. He's a character in a movie, Talladega Nights: The Legend of Ricky Bobby.

If you think about it, it's not very good advice. Obviously, coming in second in a race or contest is not anywhere near the same thing as coming in last. Second is pretty good...

Still, you see plenty of people and companies act like a second-place finish means they are losing. And from a corporate perspective, it's easy to see why so many want to win.

If you're second, you don't have commanding market share. Which means you have less power to control pricing. If you're the second choice of your customers, it means they like another service/product better. That means your marketing has to either be more aggressive or focus on the value proposition. 

All of this probably leads to lower profit margins, which can in turn affect R&D spending, compensation for top talent, and... a bunch of other stuff. 

That's why the most successful companies in history all have one thing in common: They want to win, to be #1. So they keep pushing. New products, new processes, new markets...

Amazon is among the best examples of a company that simply never lets up. There's a reason Amazon is worth $1 trillion right now.

So Much Winning

There was a time when Amazon was one of the poster children for internet investment excess. Sure, it was one of the leaders in e-commerce. But there wasn't anything in particular that set the company apart from any other company doing business on the internet.  

Then it added music and electronics. Then the marketplace (so third-party sellers could do business at Amazon). Then Amazon Web Services. 

Amazon added Prime in 2005. In 2006, Amazon Fresh started delivering groceries. The first Kindle tablets came out in 2007. Video came to Prime in 2011. And still, Amazon wasn't seen as a dominant company.

If you ask me, it was the launch of the Alexa personal assistant and the purchase of Whole Foods that got investors to reevaluate Amazon. That and the incredible revenue and earnings growth. Revenue has grown 1,000% in 10 years. That's simply amazing. 

And it shows that Amazon has now hit a critical mass point. It's no longer just another e-commerce destination. It can now create new business for itself just by offering it. 

I personally know several people who never shopped for groceries online until Amazon bought Whole Foods. And I guarantee this isn't an isolated anecdote. Plus, I saw a survey from JP Morgan the other day that found 35% of millennial males do all of their shopping at Amazon. 

Read that again: 35% of males between 22 and 36 years of age do all their shopping at Amazon. These are customers for life. Their children and partners will be customers for life. And that means Amazon has now moved into the realm of the McDonald's, Johnson & Johnsons, and Bank of Americas of the world...

Amazon is now an integral part of the economic landscape of the U.S. There is no longer any doubt about competition or whether new initiatives will succeed or fail. 

Like when Amazon starts selling prescription drugs. Yeah, it's going to take on Walgreens and CVS. And it's going to be successful. You might as well pencil in another $20 billion in annual revenue for Amazon right now...

Investment-Grade Amazon

There's another aspect of Amazon's rise to dominance that is underappreciated right now.

While the stock has had an incredible run, it hasn't really been considered a rock-solid play for retirement savings and income. But that's changing, too, and there's incredible growth ahead...

Amazon now accounts for just about 50% of all e-commerce in the U.S. But that's still just 5% of all retail. Clearly, there remains a ton of potential for Amazon, as more retail moves online. And it is now perfectly safe to hitch your retirement wagon to Amazon's growth. Safe and very profitable...

Now, Amazon doesn't pay a dividend. Not officially. Still, a small (but growing) group of investors is getting cash disbursements from Amazon right into their retirement accounts.

These steady, predictable payments are available to anyone who knows they exist. And I'll tell you about them right here.

Until next time,

Briton Ryle

@BritonRyle on Twitter

A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.