The Achilles Heel of Amazon
“To invent, you need a good imagination and a pile of junk”
Thomas Edison
One man’s junk is another man’s treasure. Thomas Edison’s quote is fascinating to me because one of the most interesting statistics I’ve seen about investing history is that there was a point in the early 2000s when Amazon, the biggest giant in retail today, was down 90%.
Instead of bailing, some investors continued to hold the fort and believed in Amazon’s business model. The price of a single share of stock has since gone from roughly $70 to about $3,000, and Amazon has not stopped investing and expanding.
The Achilles Heel of Amazon
One of the biggest knocks against Amazon in recent years was that there are simply too many products and decisions to make. One does not simply walk into Amazon and select a shirt, as Boromir might say, but rather, you type “shirt” into the search bar and voila! Seven thousand shirts are at your disposal.
Amazon is now trying to utilize Artificial Intelligence features and compiling big data to hone their product recommendations to your personal style or taste. While this type of advertising has been prevalent in the past, Amazon, and most other large retailers/advertisers/businesses, are all investing in ways to take this type of salesmanship to the next level.
What was once just a small business selling books online has now become one of the most important business models in history.
Which Boat?
Let’s say, for instance, you were investing back when e-commerce was still something that was confusing journalists on air. Would you really have picked Amazon when E-Toys’ market cap was heads and tails higher than Amazon’s? The winner of that race has been clear in hindsight, but it was far from obvious at the time.
