E-commerce is likely to grow by 50 percent each year over the next 10 years, and sales at Amazon.com (Nasdaq: AMZN) “should be able to grow at that rate or even faster,” said Amazon founder Jeff Bezos Tuesday.
“There’s a lot of headroom in this industry,” Bezos told analysts and investors at a Reno, Nevada meeting that was also broadcast over the Internet. The aim of the meeting was to provide an update on the company’s strategy and outlook.
Amazon, which has been branching out beyond its bookselling roots and now offers items including toys and consumer electronics, is “gaining traction” in the new categories, wrote Anthony Noto, an analyst at Goldman Sachs, in a research note Wednesday.
“Twenty percent of purchases in [the second quarter] were non-media, which is an important early sign of the extendibility of Amazon’s brand,” wrote Noto, who repeated a “trading buy” recommendation on Amazon after the meeting.
Noto said Amazon executives at the meeting reinforced his bullish outlook for the company by predicting no need for additional distribution centers this year or next and demonstrating improved inventory turnover, better productivity and capital spending that is in line with depreciation.
Addressing Yahoo! Concerns
Investor concerns about Amazon’s replacement by Barnesandnoble.com (Nasdaq: BNBN) as the main bookseller on Yahoo! (Nasdaq: YHOO) are “unwarranted,” Noto wrote. Yahoo! accounted for only 1.5 percent of Amazon’s sales and seven to nine percent of traffic. Amazon’s new partnership with America Online (NYSE: AOL) is larger than the Yahoo! agreement.
However, Amazon shares continued to slide in early trading Wednesday, down 1 1/16 at 39 11/16, after falling Tuesday when Barnesandnoble.com’s agreement with Yahoo! was announced.
Noto, who expects Amazon to see $1 billion (US$) in sales in the fourth quarter, said the “bears” who do not believe in the company’s business model are “vulnerable to being blindsided” by solid growth in the future.
“By the time it is crystal clear, it might be too late to own the stock,” Noto wrote.
Vision for the Future
Bezos also expounded on his vision of the future of e-commerce. A big factor driving the coming explosion, he said, will be the quality of the customer experience, something that should improve along with technology.
Bezos said he is looking for the day — three to five years from now, he guesses — when families have three computers at home. The coming ubiquity of computing, he said, is “going to make a big difference for e-commerce.”
A key technological innovation that will go a long way toward making e-shopping easier is “instant-on” computing, Bezos said. “Very few people will wait 90 seconds for the computer to boot up to do something simple,” like check movie times or look up a phone number, he said.
“That’s why people use Moviefone,” instead of going online to check what’s playing, Bezos added. “Ninety seconds is an infinity.”