Source: Amazon.com
Amazon launches “$10 or Less” store
Bringing the bargain bin to its website, Amazon has quietly launched a “$10 & Under with Free Shipping” page.
The microsite, marked by a “$10 OR LESS” click-through prominently placed on Amazon.com’s home page, displays a mishmash of items across seven categories: Women’s, Men’s, Electronics, Gifts, Home Decor, Household and Watches as well as an All section. Around the start off the year, the site featured a “Hello 2018!” section of New Year’s-themed items.
Outside of the categories, the section can’t be assorted by item, price or other parameters. About sixty percent of the items appear to be priced toward the higher end the price range ($7 to $10) and many are lighter items, such as shirts, beanies, scarves and sunglasses, favorable to shipping. But many items, including a $2.99 iPhone 6s Case and a $2.78 Watermelon coin purse, offer little margin to cover the free shipping costs that come without Prime membership.
The site can also be found under “All Programs” in the Amazon’s app main navigation.
TechCrunch, which first noticed the new site, believes the “$10 OR LESS” microsite addresses the success of sites like Wish.com, which offers cheaply-manufactured versions of popular brand name products straight from China. Wish.com ranked as the most downloaded shopping app in the U.S. in 2017. Hollar.com is a competitor.
Last June, Amazon began offering Prime memberships for $5.99 per month (down from $10.99) for those qualifying for food stamps. Some see “$10 or Less” as a way to reach low-income consumers without Prime. Speaking to Yahoo, Brittain Ladd, a supply chain consultant who worked on the expansion of AmazonFresh, believes that with its budget-driven treasure hunt experience, “$10 or Less” is targeting dollar stores.
Dollar stores have been labeled “Amazon proof” because margins on inexpensive items can’t cover the delivery costs. But Mr. Ladd believes Amazon’s extensive distribution network can keep costs down. He said, “Even if Amazon is shipping an item worth only $5, Amazon can ship the product cost-effectively because the package doesn’t have to travel very far.”
- $10 & Under With Free Shipping – Amazon
- Amazon takes on Wish with an “Under $10” selection of products that ship for free – TechCrunch
- Amazon’s new ‘$10 and Under with free shipping’ section takes on budget shopping app Wish – The Verge
- Wish.com
- Amazon is going after dollar stores – Yahoo Finance
- Will an online dollar store work? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Does a “$10 or Less” microsite fit into Amazon’s strategy? Would it be a feasible business model for anyone other than Amazon? Should dollar stores feel threatened by the move?
Poll
BrainTrust
Joy Chen
Chairman & CEO, H2O+Beauty
Ken Morris
Managing Partner Cambridge Retail Advisors
This is Amazon’s answer to the dollar store. Given the significant market that dollar stores represent, it’s perfectly understandable that Amazon is exploring it via experimentation. While I don’t believe this represents any type of existential threat to dollar store operators, it is proof positive that Amazon is more than willing to go after any category that has proven to be successful.
Isn’t Amazon’s e-commerce strategy to sell more stuff to more people? So sure, this $10 or Less tactic seems to fit right in to Amazon’s strategy.
I agree here re: selling more stuff to more people. Mix in the bargain hunter mentality, add increasing basket size as shoppers buy more for less, and combine the fact that Amazon launched free overnight shipping once basket hits $35 for Prime members and you have a recipe for success.
Would this work for other brands? Brandless has made some noise in this space as well with similar price points but I’m not sure dollar stores need to be concerned just yet.
Even Amazon can’t be all things to all customer segments through one approach and pricing formula. What so many forget about Amazon is that it is not just about a sale today. It is about the Amazon ecosystem and constantly acquiring, plus retaining, a loyal customer base. $10 or Less makes a lot of sense for Amazon to reach untapped customers. When you are shipping the volumes that Amazon has achieved, shipping lower-cost items becomes an effective loss leader to sell more Prime memberships. No one is immune from Amazon’s reach today.
$10 or Less fits Amazon’s strategy of trying to fill every shopping niche it can. All the while, it drives Prime membership. Smart move, Amazon.
Amazon has found their way to the dollar store concept. Not only will the customer find great buys, the concept can also be a way to clear excess merchandise.
Definitely a risky move — even for the risk-loving giant. This move will definitely erode margins, as a huge volume of order will go to this low ticket price merchandise.
For the rest of retail, it would be smart to watch and be the fast follower. If Amazon quietly does away with this focus, it eroded too deeply into margins. For other retailers, the important thing to do is to stick to your brand vision. If you are mid-/high-end goods, then don’t adjust to the bargain bin strategy. It will do more harm than good to your brand and business.
About dollar stores — I wouldn’t dump my stock just yet. These items feel like an impulse purchase, while standing in line to pay on the way out.
With this move, Amazon is accessing a value-conscious part of the market. However this is not a direct threat to traditional dollar stores like Dollar Tree or Dollar General. First, those stores appeal to many consumers for convenience as much as for value; Amazon cannot deliver the immediacy they offer, especially in rural America. Second, many of the less affluent shoppers at dollar stores shop less online and do not subscribe to services like Prime.
That said, Amazon’s new value store is more of a threat to non-traditional dollar stores like Five Below or online platform Hollar.
$10 or Less has a big market as proven by the dollar stores, and presents a great opportunity for Amazon. Everyone wants good value and dollar strategy does not discriminate. Amazon’s expansive distribution network will make this business model profitable long-term.
Impulse buying by bored people with a few extra dollars — sure Amazon. But we know that you are reducing the cost and anxiety of online shopping and probably bringing in a broad new demographic. Addressing the problem of those without credit cards or PayPal, and introducing a cash-on-delivery payment approach are likely next steps.
It makes sense. Amazon is in the commodity game and certainly doing a very good job at it. Going after dollar stores is troublesome because they stand to wick away middle class shoppers looking to save on routine items.
Having said that, I’m not forecasting the doom of dollar stores — they have a significant position with an income class that may not have the ability to pay online, or be home to receive packages.
I think that ultimately, $10 or Less plays the same role as the Target discount section at the front of the store — maybe driving a bigger shopping basket, and helping the consumer feel like they got a little bit more for their money.
Looking at the assortment, the requirement is a price point below $10 and free shipping. That doesn’t necessarily mean Prime eligibility. This means that it will be a place where direct manufacturers from China can get their products displayed prominently, and use the very cheap USPS e-Packet delivery service to get their product from China to the U.S. for the same price as it costs a merchant in Pennsylvania to get a product to Connecticut.
What does this mean? Bargain basement products available to whatever demographic Amazon is pitching this microsite at. As mentioned, this presumably includes lower-income households, but rich people still need phone cases too. This will certainly have some effect on dollar stores. Will it drive them out of business? No. Even when using e-Packet for delivery there is still a floor to what is profitable to sell on Amazon, and even Amazon has its limits with its own inventory.
It’s always difficult to determine if Amazon is testing a new concept or attempting to mislead its competitors. In this case I think this is a bonafide attempt to expand its market share. As noted, dollar stores have felt a bit of insulation from Amazon and other online retailers. Amazon’s actions should give them pause. I am always reminded that some people need to save money but everyone likes to save money.
It’s not too surprising that Amazon is going after yet another channel and shopper behavior. Treasure hunting has long been proven to be a reality by many retailers, including online operators. The big challenge will be controlling the infamous “price bots” that Amazon uses to price match. I wonder how thoroughly they have thought this through.
This fits perfectly with Amazon’s strategy. They’re a business built on diversification. They want to wrap themselves around every purchasing decision we make and get into every area of our life. They want us to ask, constantly: “Can I get it cheaper on Amazon?” And they’re never satisfied. Amazon want to own the whole supply chain and sales cycle and they won’t stop until they do. It’s sometimes difficult to believe that they started out just selling books. Scary though this rapid and broad growth might be, it’s a lesson for many retailers. Amazon are the original disruptors and they know how to fail fast. If this doesn’t work, in 12 months’ time it’ll be gone.
Amazon is creating an ecosystem whereby they’re able to meet the retail needs of consumers across all demographics and income levels.
Amazon will continue expanding their supply chain and logistics capabilities, as well as leverage Prime Now, to cost-effectively sell and deliver merchandise; even items traditionally sold in dollar stores.
It is also important to point out that Amazon will expand their retail footprint across their ecosystem. This means it is probable that at some point, Amazon will create a format store that could compete directly with dollar stores.
I won’t be surprised if Amazon acquires Hollar.com as it would be an easy way for Amazon to immediately become the online leader in the dollar store category.
I think this fits Amazon’s strategy of trying to head off anything that might tempt customers away from its platform. If this is its way of taking on apps like Wish, then it may do well because it has the Amazon name, which suggests a certain level of security. If customers think they’re getting the same good deal through Amazon, they may see no reason to try these new services, which they’re not sure they can trust. At the same time it may well attract new customers to Amazon who are on the look-out for a bargain.
I don’t think it’s going to drive a mass shift over from dollar stores, but of course some of its success depends on what Amazon does with it in the future and how much they make people aware of it.
Yes, this move fits into Amazon’s strategy to be the Everything Store (to everyone). They have the scale and efficiencies to make this business model work. The number of lower income consumers is growing, hence Amazon’s interest in this market. That’s why dollar stores — and Walmart — should indeed feel threatened, as Amazon will erode their market share.
What doesn’t fit into Amazon’s strategy? Amazon appears to be on a mission to own retail and no category is off limits. Low cost items are a challenge for online retailers, as often times the cost of shipping is more than the cost of the item. The “$10 or less” category can work for Amazon if they build in a little extra margin and leverage their vast distribution network and shipping economies of scale.
Walmart may be able to compete with Amazon in this segment given that 90% of the US population lives within a 10 mile radius of a Walmart but for other retailers to compete in this segment, they will either have to incorporate a membership model or have minimum order levels for free shipping.
It’s not just dollar stores that are being treated by this move. I believe this is also a test bed for the the soft goods treasure hunt made famous by TJ Maxx.
All retailers should feel threatened by Amazon!
It seems like Amazon is infiltrating every industry these days. From the list of items, it looks like the Microsite was pretty simple to pull together, will be interested to see how much muscle Amazon puts behind this initiative though.
This is about “stickiness” to Amazon’s platform for their customer base more than it is about stealing customers away from dollar stores. Should those dollar store brands be nervous? Sure, just as every retail segment should be nervous about Amazon entering their space. Why? You can’t predict where and how Amazon’s next shopping innovation will affect your business.
For now, this is Amazon’s way of enticing customers to add a few more items to their shopping cart and continue to raise the perceived value of the shopping experience. It will be interesting to watch if this becomes a popular shopping destination for Amazon customers.
Of course this fits into Amazon’s strategy of acquiring customers. If they would have put out a press release announcing it or their plans to create it — dollar stores and others would have taken a pretty solid hit to their market cap. The dollar stores and even digital upstarts like Hollar and media favorite Brandless for sure should feel threatened because a “race to the bottom” in the dollar store business is a pretty crazy battlefront.
The evidence is in. Anything and everything in the world is fit and feasible within the realm of the Amazon business model.
An excellent way to introduce dollar store, budget-strapped or fixed income consumers to the viability of using Amazon for household products. A smart way to introduce consumers who cannot afford to shop Amazon.com for everyday needs, nor afford shipping charges or a prime membership. And of course treasure hunters; people who love a deal.
Should dollar stores feel threatened? No. Barriers to success?
With e-Commerce, as long as Amazon can turn a profit, any segment is a fair game. Great thing about microsites is that they are easy to adjust and merchandise based on what is available. I think they have a way to go before they threaten the dollar stores in terms of selection, but it will satisfy the impulse buying crowd
The everything store aims to sell to everyone and this is just the next step in that plan. This is a new addition to Amazon, so there is no telling if it will stick around or burn out. It is worthwhile to try, though, as dollar stores and off-price retailers have been doing well recently.
When Amazon sees a promising sector within retail, they have the ability and funds to try their hand at it. I don’t think dollar stores should be afraid just yet, but ensuring they have competitive offerings (in terms of pricing and assortment) will guard them against any negative impact from Amazon’s new microsite.
The $10 or less model with no shipping fee sets a dangerous precedent. People will start expecting free shipping without Prime membership and it could upset Prime shoppers. It’s definitely a valid test, but I am skeptical that this will continue after a trial period.