Amazon.com Inc. AMZN recently announced the launch of subscription-based Prime membership in Singapore. The service will focus on areas like fast and free shipping, streaming and gaming.
The move comes about six months after the e-commerce giant ventured into Southeast Asia with the launch of Prime Now, its two-hour delivery window, in Singapore.
However, Amazon has underperformed the industry it belongs to on a year-to-date basis. The company's shares have gained only 54% compared with the industry
's growth of 55.2%.
Historically, Southeast Asian countries have attracted investors from across the globe, thanks to solid growth rates, booming populations and good governance. In fact, Southeast Asia has started attracting attention due to increasing growth of internet services.
With this recent investment in Singapore, Amazon will increase its presence in a nascent but populous online retail market. According to a 2016 report, co-authored by Google, e-commerce in Southeast Asia is on track to grow and is expected to reach $88 billion by 2025 from $5.5 billion in 2015. As of now, only 3% of all commerce is carried out online in the region.
Also, the latest move will give Amazon an edge over its competitors including Lazada, the e-commerce site owned by Alibaba (BABA). Lazada had launched its subscription-based customer loyalty program LiveUp in Singapore in April.
Notably, Prime has been a great success for Amazon in the United States. The company now wants to replicate this success in international markets. The current focus is on building video content, primarily for Prime subscribers, owing to considerable growth prospects.
International Expansions Key Catalyst
Last December, the company launched Prime Video (barring China) globally. That makes sense especially when it is witnessing immense competition in online retail and Prime saturation in the United States.
However, its retail business in the United States is still hard to beat on price, choice and convenience, thanks to Prime and Fulfillment by Amazon (FBA).
If Amazon is able to taste similar success internationally, the company could see far more growth. At the moment, international contributes one-third of the total revenues but generates just a fraction of profits.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. Price and Consensus | Amazon.com, Inc. Quote
Zacks Rank & Stocks to Consider
Amazon currently carries at a Zacks Rank #3 (Hold). A few other top-ranked stocks in the broader technology sector are Groupon Inc. GRPN , PetMed Express, Inc. PETS and SMART Global Holdings, Inc. SGH , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Long-term earnings per share growth rate for Groupon, PetMed Express and SMART Global is projected at 10%, 10% and 15%, respectively.
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