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How Amazon Beat the Street

Amazon.com co-founder/chief Jeff Bezos e deserves serious kudos for the way his company is pulling away from the rest of the online retailing pack. He built a multibillion-dollar company without turning a profit for eight years, and somehow gets away with not charging for shipping--unheard of in the online retail business.

However, just a few short years ago, Amazon was dragging its feet badly. Bezos attributes the change to the introduction of Amazon Prime, an innovative product offering unlimited two-day shipping for an annual fee of $79. Wall Street never thought it would work, but it turns out that Prime is largely responsible for the turnaround in Amazon's fortunes. Analysts say Prime helped deliver a 35 percent rise in overall sales in the first quarter. Trading at $30 two years ago, Amazon's stock last week shot up to a seven-year high: $86 per share.

Amazon is certainly a seller-friendly environment, with 1.1 million individual sellers and small merchants using its systems; stiff competition makes it a buyer-friendly market. "There's no back-to-school reason to buy a new computer, no holiday gifts to give, and yet Amazon has begun landing the sales these other companies aren't," says Rick Munarriz, senior media analyst for MotleyFool.com.

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