Amazon's Strategy to Enhance Sales

By Arriana McLymore and Ananya Mariam Rajesh

(Reuters) – Amazon (NASDAQ:AMZN) is focusing on providing more everyday essentials like toothpaste, which is impacting its average selling prices. This strategy aims to counteract competition from rivals like Temu and Shein, known for their low-cost goods shipped from China.

Amazon reported an increase in customer shopping frequency and basket size due to the addition of affordable items. CFO Brian Olsavsky noted that everyday essentials are becoming a significant part of Amazon's offering, benefitting overall revenue growth.

Despite the decline in average selling prices, which Amazon CEO Andy Jassy attributed to customers opting for cheaper, essential items, the sales of higher-priced products are seeing slower growth. John Belton from Gabelli Funds forecasts continued pressure on selling prices in upcoming quarters due to this mix.

Local Warehouse Advantage

To mitigate the effects of lower prices, Amazon is leveraging its extensive network of local warehouses to ensure fast shipping. Jassy emphasized the importance of managing costs effectively to offer a wider selection of affordable items sustainably.

While Shein is also trying to sell more everyday products, experts believe its transition will be challenging, given its current market focus. Shein is not able to compete on quickly supplying essentials, which could limit its success in this area.

Amazon faces additional competition at home, especially from Walmart and Target, which are aggressively lowering prices on essentials to attract budget-conscious consumers. Walmart’s upcoming financial report is anticipated to reflect a 4% revenue increase, slower than prior growth rates, while Amazon reported a 7% retail sales increase in its third quarter, up from 5% in the previous quarter. Internationally, Amazon’s operating margin rose to 3.6% from 0.9%, and North America’s margin increased slightly to 5.9%.