The e-commerce giant may have started small, but it didn’t become the behemoth that it is by selling low-priced goods with low or free shipping. To purchase something on the platform at a low price, you needed to pay much higher shipping costs.
Obviously, this didn’t stop its consumers from purchasing its goods, as the online retailer kept growing at a very fast pace over the years, and still continues to do so. However, it failed to attract a large portion of lower-income shoppers.
Not anymore. Now, Amazon offers its Prime consumers the option to purchase $1 items individually without paying for the shipping. What’s more, Amazon will deliver the goods the next day.
Free One-Day Shipping for Individual $1 Items
Until recently, Amazon’s Prime customers could get one-day free shipping only if their orders reached the threshold of $25. Any low-priced item was considered an add-on product, which means that you could only ever purchase them as part of a larger order, the minimum value of which needed to be $25.
So, if you’re a Prime member who wanted to buy a $1.99 deodorant, but didn’t want to pay double or more for its shipping, you needed to combine it with other items to reach an order of minimum $25 to get your free next-day delivery. As a matter of fact, its Prime shipping was two days until recently, so the speeding up is another plus for Prime customers.
Now, as an Amazon Prime member residing in the US, you don’t need to jump through all those hoops to buy low-priced items on the platform. You can now buy individual $1 items without the expensive shipping costs involved, and they’ll arrive at your doorstep the next day.
The e-commerce giant even completely removed its Amazon Add-On program, so the $25 threshold for free one-day shipping doesn’t exist anymore.
What Does This Mean for Dollar Tree and Dollar General?
Dollar Tree and Dollar General, the two most popular American chains of variety-discount stores, managed to keep flourishing over the years, as they offered significantly lower prices than the e-commerce giant. They kept opening new stores in areas with lower-income consumers, and Amazon’s growth has never curbed theirs.
Dollar Tree still offers all of its products for $1. Family Dollar, their subsidiary, offers them at a bit higher prices, just like Dollar General, its main rival. They all offer great discounts that keep customers flocking to their stores.
But will this new Amazon move hurt these stores? If people can now buy all the items that Dollar Tree and Dollar General offer at the same price on Amazon, and receive them the next day, will they turn to online shopping and not visit the brick-and-mortar stores anymore?
This remains to be seen, but the large portion of Amazon Prime members come from higher-income households. This means that quite a lot of lower-income consumers, who will benefit the most from Amazon’s new sales strategy, don’t really have Prime subscriptions. A lot of them are living from paycheck to paycheck, and still predominantly purchase from physical stores.
Amazon needs to develop a strategy for attracting those customers if it were to pull them from convenience stores, retail outlets, and other brick-and-mortar stores. So, Dollar Tree and Dollar General are not very likely to feel the impact of Amazon in the near future and lose their loyal customers.
Anti-competitive or a Profitable Sales Strategy?
Many retailers are complaining that Amazon is anti-competitive, but the e-commerce giant is protected by the current antitrust law. The law is focused on low prices, and Amazon does offer low prices for its consumers. However, Amazon did face multiple antitrust investigations in 2019.
Nonetheless, while some will agree that Amazon is behaving anti-competitively, others will see it as a great sales strategy. Its Prime customers will benefit a lot, while its supplies will welcome the sales increase with open arms.
But is the strategy really profitable? Can Amazon afford to ship all those cheap goods for free? Shipping costs still exist, and someone has to pay for them. Is Amazon actually losing money with its free delivery of low-priced items?
Maybe not right now. Its sales have certainly spiked, as it can now generate higher orders from all the Prime customers it currently has. Perhaps it’s even pulling a lot of lower-income consumers from dollar stores.
However, it is possible that it might lose money in the long run. What would happen to its suppliers then? Would Amazon pull the plug on their accounts if it starts losing money when selling their products? There may be consequences in the future, but all we can do for now is speculate.
What About the Environment?
A lot of Amazon employees are worried about climate change, and they actively participate in various climate change initiatives. Recently, more than 3500 Amazon employees spoke publicly against their company, urging the Amazon CEO and board of directors to develop a plan to tackle climate change.
In September, Jeff Bezos pledged to combat climate change, announcing that Amazon will reduce its carbon emissions with the goal of becoming completely carbon-neutral by 2040. However, its employees still remain unconvinced and continue to organize public protests.
And for a good reason. If Amazon is shipping individual low-priced items every single day just to grab a bigger piece of the pie, how is it reducing its carbon footprint? How will it make zero emissions in the future? This is another lingering question to which there’s still no definitive answer on the horizon.
For the time being, the most burning question that concerned dollar stores such as Dollar Tree and Dollar General has been answered. They are really not likely to lose their sleep, or their money, over Amazon’s new aggressive strategy.