On Thursday, e-commerce giant Amazon.com Inc. AMZN disclosed a shift in consumer preferences towards lower-priced items and everyday essentials, resulting in a drop in average selling prices (ASPs).
What Happened: During Amazon’s second-quarter earnings call, the e-commerce giant CEO Andy Jassy highlighted that customers are increasingly opting for lower-priced items, leading to a decrease in ASPs.
He said while high-ticket items like electronics are growing faster for Amazon than elsewhere in the industry, the growth rate is slower compared to a more robust economy. However, Amazon’s expedited delivery speed has led to an increase in everyday essentials sales.
“So, far this year, our speed of delivery for Prime customers has been faster than ever before, with more than five billion units arriving the same day or next day,” he stated.
Brian T. Olsavsky, Amazon’s senior vice president and CFO, also said that consumers continue to look for deals and lower ASP products, a trend expected to continue into the third quarter. “The difference in Q2 was that, again, we had very strong unit volume growth.”
He also noted that the drop in revenue growth was tied to ASP and growth in everyday essentials business and categories.
“While we think we are selling a number of higher ticket items, certainly and holding up well in the market itself, certainly not as strong as it’s been in a normalized economy,” Olsavsky stated, adding, “And lower ASP products are more of the mix right now.”
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Why It Matters: Amazon’s shift towards faster delivery services has been a strategic move to cater to last-minute shoppers. This strategy has resulted in a significant increase in Amazon’s share of online orders during the holiday season.
In March this year, it was reported that Amazon has been focusing on enhancing its delivery speed and trust to counter the rise of emerging e-commerce platforms like Temu and Shein. These platforms, originating from China, have swiftly gained traction in the U.S. market, directly targeting Amazon's customer base.
Meanwhile, on Thursday, Amazon reported second-quarter net sales of $148 billion, marking a 10% increase year-over-year. However, these sales fell short of the Street consensus estimate of $148.56 billion, according to data from Benzinga Pro.
Price Action: At the time of writing, Amazon shares dropped 6.88% to $171.40 in after-hours trading on Thursday. In the regular session, the company’s shares were down 1.56% ending at $184.07.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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