Amazon's (AMZN) Advantage

Jeff Bezos, the founder and CEO of Amazon (AMZN), looks a bit mad. Stick thin and without a hair on his head he is both bug-eyed and frenetic. He has the look of a man who has never slept.

Bezos founded Amazon in 1994, which makes him one of the internet’s few elder statesmen. While the other old guard tech companies like Microsoft (MSFT), Ebay (EBAY), and Yahoo! (YHOO) have not aged well, Amazon is in the midst of the best period in its history.

The 2008 holiday season was a bust for both traditional retail and e-commerce. Research operation comScore reported that online holiday spending hit $25.5 billion, which was down a couple of percentage points from the same period in 2007.

Amazon announced its fourth quarter earnings today. Revenue was up 18% to $6.7 billion. The spread between that growth and the rest of the industry is extraordinary. Net income increased 9% to $225 million.

Amazon also said that it would grow as much as 19% in the current quarter. Forrester Research today said it expects e-commerce sales to be up only 11% for 2009.

So, there is clearly something magical about Amazon. The largest company in a sector in any industry is not supposed be among the fastest growing.

The first key to the company’s success is the breadth of it product offering. Amazon started as an online bookstore. Now it sells everything from DVDs to PCs to jewelry. Consumers do not have to go to half a dozen destinations to get what they want. They can buy almost anything there is to buy online at Amazon.com.

Amazon has been around for well over a decade. That makes it "safe" which is still an issue for some people who hand out credit card data when they shop on the Internet. The company has a stellar reputation for customer service. Earlier this month ForeSee Results asked 9,000 holiday e-commerce shoppers how they ranked retail websites for customer satisfaction. Amazon was in the top five. Probably no one would be surprised to hear that Apple (AAPL) was also highly rated.

While Amazon has the largest range of products available online, it acts as if it were a start-up company. Not unlike Apple (AAPL), Amazon under the leadership of Bezos has some new and exciting product every year. For 2008, that was the Kindle portable book reader. When Oprah got her hands on one, Amazon could not keep them in stock. The product gives customers access to over 200,000 titles each of which can be downloaded wirelessly in a few minutes. In 2007, Amazon introduced its video-on-demand product which allows consumers access to premium content over the internet.

Amazon is not just good at what it does. It is good at what it is going to do. That gives the company an aura not entirely unlike Apple’s. Consumers want to know what Apple will do next. People look at Amazon the same way.

Bezos has done something which is nearly impossible. He has operated his company well since it was started 14 years ago and he makes it a more exciting place to shop as each year passes.

Douglas A. McIntyre