Amazon Creates New “AmazonBasics” Brand
In what seems like a power grab between Amazon and the retailers it currently services, Amazon’s new low cost brand could be a big winner. AmazonBasics is set to launch soon, offering audio and video cables, computer networking cables and blank DVDs at a price unmatched by any of its current sellers.
Amazon’s big expansion
Normally I’m very critical of companies looking to expand during recession. Amazon, however, isn’t just throwing darts at the board. The company has virtually zero debt, huge stocks of cash, and I’m sure a name like this wouldn’t be tossing money around just to find one ambient money maker. Bezos isn’t that kind of CEO. A mild setback here would be nothing, as its already generating tons of PR, and the company knows consumer prices better than anyone on the planet.
Why Amazon is what Google isn’t
Amazon earns money directly by either selling a product, or brokering the sale of a product. It earns money when someone spends money on its site. Google, on the other hand, brokers data, and makes money by selling advertising in between this data. Both Google and Amazon are a lot alike, they have access to all kinds of data. Amazon has access to much better data, the price people are willing to pay, the average length of consumer electronic cords. I mean, truly, in much the same way Google knows what people are looking for, Amazon knows how to sell it to them.
Pricey, but Strong
Amazon currently trades at a PE of 60, which is pretty high for a dotcom these days, and even higher for a retailer. But when you consider how much top line growth Amazon is opening up with AmazonBasics, this still is at least a good long term play. Granted, current growth is around 25% per year, but with this move Amazon definitely upped its earnings prospects.
