If you can't beat Amazon, buy it

You should be careful of people pushing stocks. At best, it's honest analysis, presented for the benefit of the reader. At worst, they're trying to create demand that would push the share price up, creating the very gains they claim are coming. And somewhere in between, it's insidious confirmation bias - there's nothing quite like penning a "why I like this company" article to convince yourself that you're right.

Now, Amazon.com is a $600 billion company. Try as I might, I couldn't move its share price if my life depended on it. Nor can I fully escape the clutches of confirmation bias.

And, to declare my hand right up front, I own shares. I think you should, too.

When it launched, Amazon held itself out as Earth's Biggest Bookstore. Whether it was true at the outset or not, it quickly filled that promise. Then it branched out. Toys. Shoes. Electronics. It gained size - and grew sales - at a phenomenal rate.

In the most recent quarter, Amazon - after two decades of breakneck growth - grew sales by another 25 per cent or $48 billion (yes, with a 'b') in dollar terms. For context, Woolworths, Australia's largest grocer, sold $59 billion worth of products in the whole of 2016. That means Amazon's growth alone is approaching Woolies' total sales. I can't overstate how impressive that rate of growth is - it's also accelerating, since Amazon's sales growth was $10 billion higher than the previous year.

But what makes Amazon's march so impressive - and potentially unstoppable - is not what it has done, but how it has done it: through a relentless focus on the customer. That shouldn't be remarkable - it's a retailer, after all - but it is. By convincing investors to let it run at essentially breakeven, Amazon has been able to reinvest the proceeds of those sales into more categories, more countries and yes, lower prices.

The most stark example of that focus is the rise of its eBook reader, the Kindle. Almost every other company on the planet, when faced with something that could disrupt its business, does one of two things - buries its head in the sand, pretending there's not a problem, or circles the wagons, getting ready to fight for its turf. Think: Kodak, as digital cameras were on the rise.

Amazon, faced with eBooks, did the opposite. It set up a satellite office and staffed it with people who were effectively told to disrupt - and potentially destroy - Amazon's lifeblood; its book business.

Later, using its scale and heft, Amazon introduced free two-day shipping for members of its then-new Prime program. It learned the value of membership from Costco, among others, and took to it with gusto, later adding a free video streaming service for those members.

It sold spare computing power to companies, and Amazon Web Services was born - a business that will likely turn over more than $12 billion in sales this year.

There was a time when people, particularly in America, decried the grocery behemoth Wal-Mart, for its effect on their "mom and pop" stores. No one talks about Wal-Mart that way any more. It still leads Amazon on sales, but the latter's market value is now almost double that of the incumbent.

Wal-Mart is still trying to work out how to compete with Amazon. The US electronics retailer Circuit City went broke, in large part due to its inability to compete effectively. And Radio Shack is essentially no more.

Maybe Amazon ends up being a non-event here. Certainly the likes of Harvey Norman's Gerry Harvey have been talking down its chances. But the evidence suggests otherwise. Strongly. Australians are well-known around the world as early adopters. And Amazon is yet to find a market it can't make serious inroads into.

Foolish takeaway

The Everything Store, as it's known, will make a very meaningful impact in Australia. I would suggest that some bankruptcies will result, as we flock to buy from one of the most customer-centric businesses on the planet. Not every Australian retailer will suffer. Some will even prosper, by selling through Amazon's marketplace.

But one thing is for sure: it will change the Australian retail landscape forever. As an investor, then, you're much better owning the company that is creating the future, rather than one trying to quickly adapt. That's why I think Amazon deserves a place in your portfolio.

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Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP or email ???ScottTheFool@gmail.com. The Motley Fool's purpose is to educate, amuse and enrich investors.

This story If you can't beat Amazon, buy it first appeared on The Sydney Morning Herald.