Amazon (AMZN -2.64%) has built its brand on fast shipping speeds and getting products to customers as quickly as possible. Many brick-and-mortar stores just can’t compete with the online retail giant.
But by focusing primarily on speed, Amazon may have overlooked customers who care about price and value low prices over fast shipping. And those customers are turning to cheaper Chinese e-commerce sites to save money. But it seems Amazon has realized this. And with its latest move, the company is targeting those buyers.
Amazon Launches Service for Bargain Hunters
Whether it’s books, household items or groceries, you can usually find what you need on Amazon. But if you’re looking for deep discounts and ways to save, you might want to turn to Shein or Temu, both owned by PDD Holdings. These websites lure buyers with shockingly low prices. The only downside is that deliveries from Amazon, which offers same-day delivery in some markets, often take longer than usual.
But lately, Amazon seems to be paying more attention to these sites. The online retail giant is reportedly considering launching a new service aimed at cheap fashion and other goods shipped directly from China, according to The Wall Street Journal. It wouldn’t offer the usual fast shipping — orders could take nine to 11 days — but it could reduce the incentive for shoppers to look outside Amazon’s marketplace for cheaper deals.
The company’s growth could get a much-needed acceleration
Offering a slower delivery service may go against Amazon’s strategy, but it gives the company a way to compete with Chinese e-commerce sites. It also targets a different type of consumer who cares more about price than delivery time, which could be a potentially big market for Amazon. Last year, PDD Holdings reported revenue of nearly $35 billion, nearly double its revenue from the previous year. In addition to Temu, PDD also owns Pinduoduo.
This could be an opportunity for even greater growth in the coming months and quarters as consumers become more price conscious amid tougher economic times. For Amazon, targeting cheaper products could be a key way to not only grow its business but also prevent its growth rate from slowing further. While Amazon is experiencing double-digit growth, its performance is significantly down compared to a few years ago.
Should you buy Amazon stock today?
Amazon shares have risen about 30% this year and recently hit a valuation of $2 trillion. The company trades at over 50 times P/E, but it could still be an attractive stock in the long term, especially with its focus on bargain hunters.
A direct comparison of Temu and Shein could be a great move for Amazon to drive further sales growth and motivate shoppers to stay on the site. Providing more reasons to use the site could also help improve the value proposition of Amazon Prime membership, which could lead to more users signing up for Prime.
Overall, this looks like a great move for Amazon, and I think it will pay off big time with strong revenue growth in the future. And given the improving growth outlook, this already-solid e-commerce stock is even more of a buy today.