Reportedly, Amazon.com Inc. (AMZN), the world's largest online retailer, is in negotiations to purchase a 66-acre plot in Shakopee’s Shenandoah Business Park.
According to Business Journal, the company plans to develop a distribution center on this property — the first in Minnesota — which could create hundreds of jobs during the holiday season.
Last September, Amazon had announced that it will start collecting sales taxes from Minnesota customers, effective Oct 1, 2014. This announcement led to speculations that the company might be opening a warehouse, data center or some other operation in the state or acquiring an existing firm.
Fulfillment centers are giant warehouses that help online retailers store and ship products and handle returns quickly. These are important for providing the level of customer service that customers have come to expect of Amazon.
Over the past few years, Amazon has invested heavily for setting up fulfillment centers across the country to cut shipping costs and speed up delivery. The need to expand fulfillment centers is due to the growing demand for online shopping among Internet users. Prompt and accurate delivery of products is very important for the success of online retail companies.
Small retailers that are unable to provide relatively cost-efficient shipping are also signing up for Amazon’s fulfillment services. Third parties also use Amazon’s warehouses and shipping services. These help online retailers to increase revenue base and drive expansion.
In our view, Amazon must maintain its U.S. market share while expanding globally to retain its leadership. For this, the online retail giant needs to invest more in fulfillment as well as technology and content, especially in international markets with less penetration and higher growth rates.
Though the increased expenses could hurt the company’s bottom line in the near term, we believe these are necessary to maintain its dominance in this highly competitive market.
Stocks to Consider
Currently, Amazon has a Zacks Rank #3 (Hold). Some stocks in the same space that have been performing well include PetMed Express, Inc. (PETS), Autobytel Inc. (ABTL) and EVINE Live Inc. (EVLV). While PetMed sports a Zacks Rank #1 (Strong Buy), Autobytel and EVINE Live have a Zacks Rank #2 (Buy).
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