What No One's Saying About Amazon

Amazon is significantly changing the way people buy and that means changes to the supply chains that have been built for a different business model. Aivars Lode avantce

What No One's Saying About Amazon

By AnnaLisa Kraft - September 1, 2012 | Tickers: AMZN, AAPL, BKS, BBY, SHLD | 34 Comments

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

They say everyone has a book in them. That doesn’t mean it’s worth reading. But Amazon.com (NASDAQ: AMZN) makes it possible for everyone to get that book out. This is the one thing no one seems to be talking about. The September 6th press conference in Santa Monica has everyone abuzz speculating on an Amazon phone or a Kindle Fire 2.

Frankly, I don’t care what it is because I believe Amazon is on a multi-year tear. After revolutionizing commerce, it has revolutionized publishing. This is what intrigues me.

You can publish within days instead of waiting months for a brick and mortar publisher‘s recent English major grad to read your magnum opus out of the 200 a week said English major has to wade through (they don’t call it a slush pile for nothing). Another amazing thing is you can publish a physical book within days with an Amazon feature called Create Space and make the book available on demand to an author’s clamoring public. And the service is free!

What has really changed the book business for authors is that they can get up to a 70% royalty as opposed to the usual 7-10% for a debut book. Why anyone who can cobble 50,000 words together isn’t self-publishing is mind-boggling. Not everyone will be an Amanda Hocking, the Kindle self-publishing sensation, but some of the dreck I’ve previewed is selling to someone and Amazon is making money off it.

In 2011, Newsweek featured a beaming Jeff Bezos, Amazon’s founder and CEO, with the headline, “Books Aren’t Dead” and the takeaway of the story was that Kindle books had outsold all the paperback and hardback books together on Amazon. There is a renaissance in reading (OK, maybe a lot of that is ‘erotica’) and Amazon is outdoingBarnes & Noble (NYSE: BKS) by a country mile.  With negative earnings of $1.81 they can’t compete even though Nook may be superior with color and backlight.

And So Much More

If the publishing aspect of Amazon isn’t enough for you there’s the rest of Amazon’s e-commerce world with Zappos, Diapers.com, Wag.com (all you need for pets), and Amazon Local Deals--their Groupon type feature and then there’s the Kindle Fire. Amazon has just released news that it has 22% of the tablet market in the U.S. and the world is waiting for that Kindle Fire 2. If there’s a smart phone, too, then there’ll be no holding back Amazon.

Amazon is making so many bricks and mortar retailers irrelevant like Best Buy (NYSE: BBY) and Sears (NASDAQ: SHLD) as it is just superior on price on consumer electronics (for more see fellow Fool Chad Henage‘s take on SHLD). Book publishers should be quaking in their boots the same way CD and record stores should have when the iPod and iTunes came out.

Speaking of Apple (NASDAQ: AAPL) and I do love Apple with its 15.60 PE and its ‘ecosystem’, one day Apple may be looking over its shoulder only to find Amazon in front of them despite its current 299.90 P/E. It won’t be this year or next year but I think it’s possible. One last thing people are not talking about is Prime, a great service that gives members free 2 day shipping, streaming videos and deals and lending library for Kindle. Just in the last 10 days Amazon has signed deals with ESPN and NBC Universal for some of the more popular content people want. Prime may be mentioned at that September 6th presser as several of their latest press releases have involved the Prime service; that Prime members have used the Kindle Lending Library over 100 million times and those content deals as well as Prime members preferring the Prime free two day shipping over Free Super Saver Shipping.

One possibility that could be mentioned on September 6th is some sort of Prime incentive for signing up as a multi-year member. Maybe something like the telecoms do, a Kindle Fire for free if only you sign up for two to three years in advance. Just speculating.

Don’t forget colleges are back in session and one of the best ways to save on those books is Amazon and they’re also offering textbooks on Kindle (although that isn’t necessarily cheaper.) Back to school is expected to be even better for e-tailers this year according to the National Retail Federation.

Short Term/Long Term

It doesn’t matter to me what they say on September 6th. Amazon is a phenomenon just at the beginning of its brilliant career. Yes, it's close to a 52 week and all time high. Just forget the September 6 noise and think about the earnings release in January when all the holiday and back to school numbers come out. That will give you something to talk about.