Analyst Jim Friedland wrote in a research note: “In our view, Amazon is a next-generation Wal-Mart, and we believe the company’s focus on lower prices and a superior shopping experience versus online and offline competitors will result in substantial share gains over time.”
The reasons for Cowen’s vote of confidence are numerous, citing greater penetration in non-media categories, more orders per customer resulting from Amazon Prime (a discount shopping program) and the ability to reinvest profits (a la Wal-Mart) from higher margin revenue sources into lower prices across the board. The report notes that Wal-Mart has 7.7% of U.S. retail share, while Amazon owns only 0.3%. That’s a lot of room to grow.
Friedland was particularly impressed by Amazon’s positioning as a result of the Kindle’s success. The company estimates Amazon will sell 900,000 this year and 1.4 million next year. By 2013, Kindle penetration could reach 10% of Amazon’s customer base, or 2% of the U.S. population, the report says.
So is Amazon on the way to Wal-Mart-like highs? Much like Wal-Mart, Amazon’s growth potential stems from its ability to sell everything from Kindles and MP3s to patio furniture and kitchenware, and to do so at very competitive prices. A recent push into private label products suggests Amazon has its eye on those non-media categories, and the immediate availability of many Amazon products, its easy searchability, and its investment in customer service lend it a competitive advantage over both online and brick-and-mortar rivals. Much as Wal-Mart redefined the retail model over the past three decades, Amazon may rewrite the book for the Internet age.