As summer heats up, North America's largest retailers are diving into aggressive price-cutting campaigns to attract shoppers. Last week, an array of discounts emerged as retailers aimed to ease the financial strain on consumers. For instance, Target Corporation (TGT) announced that it would cut prices on 5,000 items, including diapers and pet food. This followed their February launch of the ‘dealworthy’ discount brand, introducing 400 household and essential products mostly priced under $10. Walmart Inc. (WMT) also revealed that it would lower costs on 7,000 items, marking a 45% increase in price rollbacks. Aldi and The Kroger Co. (KR) have also jumped on the bandwagon, aiming to reduce grocery prices.
In a move to stay competitive, Amazon Fresh, a subsidiary of Amazon.com, Inc. (AMZN), has entered the fray with a promise akin to Prime Day, offering substantial price cuts on 4,000 products, with new deals rotating weekly. The company announced that these price reductions will apply to items both online and at its Amazon Fresh brick-and-mortar grocery stores.
“Increasing our weekly deals across thousands of items and expanding the reach of Prime Savings at Amazon Fresh is just one way that we're continuing to invest in competitive pricing and savings for all of our customers,” said Claire Peters, Amazon Fresh's worldwide vice president.
As reported by CNN, Amazon's sweeping price cuts will cover a variety of categories, including meat, seafood, frozen foods, beverages, snacks, dairy, cheese, and pasta. The discounts will apply to both well-known brands and Amazon’s private-label products, such as the Aplenty grocery line. Additionally, Amazon Prime members will receive an extra 10% off additional items when they shop online.
These widespread price cuts come at a time when inflation has persistently raised grocery costs by 1.1% year-over-year as of April, a slight decrease from March's figures. With restaurant food prices up by 4.1% over the same period, these retailers have a window to draw in budget-conscious consumers looking for grocery deals.
The company’s strategic move to offer significant savings not only aims to draw more customers but also solidify its position in the highly competitive grocery market.
Unlimited Grocery Delivery Subscription, a Treat for your Wallet!
Last month, the online retail giant launched a new, low-cost grocery delivery subscription service exclusively for Prime members. Priced at $9.99 per month (with a discounted rate of $4.99 per month for SNAP/EBT cardholders), this subscription service promises unlimited delivery on orders exceeding $35.
What sets this service apart is its extensive coverage, spanning over 3,500 cities and towns across the United States. Initially trialed in three cities in 2023, the program has now expanded nationwide, showcasing Amazon's commitment to streamline and enhance the grocery shopping experience.
Customers enrolled in this subscription gain access to a vast selection of retailers, including Whole Foods Market, Amazon Fresh, and various local grocery and specialty retailers accessible through Amazon.com. By incorporating popular stores like Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, and Mission Wine & Spirits, Amazon is further solidifying its position as a go-to destination for all grocery needs.
Tony Hoggett, senior vice president of worldwide grocery stores at Amazon, said, “Our goal is to build a best-in-class grocery shopping experience — whether shopping in-store or online — where Amazon is the first choice for selection, value, and convenience. We have many different customers with many different needs, and we want to save them time and money every time they shop for groceries.”
In the context of Amazon's recent price cuts and initiatives to enhance its grocery offerings, this new subscription service adds another layer of convenience and affordability for customers.
How Did Amazon Perform in the March Quarter?
In the first quarter that ended March 31, 2024, net sales increased 12.5% year-over-year to $143.31 billion. Sales at AWS accelerated 17%, reaching $25 billion, topping Wall Street’s expectations of $24.5 billion. This uptick comes after a period of slower growth due to reduced cloud spending, with new demand for generative artificial intelligence boosting AWS's performance.
Operating income surged 200% in the period to $15.31 billion, which outpaced revenue growth and demonstrated the effectiveness of Amazon’s cost-cutting and efficiency strategies. AWS contributed 62% of the total operating profit. In addition, AMZN’s net income more than tripled to $10.43 billion, or $0.98 per share, up from $3.17 billion, or $0.31 per share, a year earlier, beating analysts' average EPS estimate of $0.83.
The impressive earnings growth has been driven by Amazon's widespread cost-cutting, adjustments to its fulfillment operations, and stabilization in cloud spending. CEO Andy Jassy has been implementing a disciplined approach to spending while expanding profitable segments like advertising, cloud computing, Prime memberships, and the third-party marketplace.
For the second quarter, Amazon expects continued profitability growth, projecting operating income between $10 billion and $14 billion, up from $7.7 billion a year earlier. Net sales are forecasted to range from $144 billion to $149 billion, representing growth of 7% to 11%.
Shares of the e-commerce and tech company climbed more than 52% over the past year and nearly 21% year-to-date.
Bottom Line
Amazon’s strategic price cuts are more than just an attempt to lure in customers with the allure of a good deal; they are a calculated move to enhance consumer satisfaction and loyalty. By rotating sales and offering substantial discounts, Amazon gives budget-conscious shoppers a reason to keep coming back, ultimately boosting sales volume and customer engagement.
These discounts cover a wide range of essential grocery and entertaining staples, from meat and seafood to dairy and snacks, with some items marked down by as much as 30%. This tactic ensures that Amazon remains a top choice for food purchases, in addition to household items.
"Amazon is committed to building a best-in-class grocery shopping experience, whether in-store or online, grounded in the values Amazon is famous for: price, selection, and convenience," the company stated in a press release.
This commitment was evident during the recent Memorial Day sale, where Amazon slashed prices on over 50 items, including its own brands and popular electronics from Apple and Sony. The company offered up to 50% off Amazon devices like Fire tablets and Blink cameras, and 32-inch Amazon Fire TVs were discounted by 40%.
Moreover, the launch of subscription service complements these price cuts and enhances its competitive edge in the grocery delivery market. As the e-commerce giant continues to innovate and expand its offerings, its commitment to competitive pricing and customer satisfaction is evident. These efforts are likely to enhance customer loyalty, drive sales growth, and ultimately have a positive impact on AMZN’s financial performance.
