Many Amazon Prime members will be looking forward to the company’s Prime Big Deal Days sales event on Oct. 8 and 9. They will be hoping to save money on expensive items like big-screen TVs, imported coffee makers, and the newest gaming systems.
But more and more people are buying household things like laundry detergent, batteries, and toilet paper on Amazon AMZN -3.06% at the moment. It is promoting that area through its Prime sales event, which also has deals on more expensive items.
Analysts and experts who spoke with MarketWatch say that this is making Amazon, a company that already makes about $600 billion a year from all of its businesses, an even stronger force in global shopping. In its early years, almost 30 years ago, the company started out as an online shop but has since grown to sell many other things as well.
Sam Bloom, head of partnerships at PMG, said, “You’re seeing a behavior change right in front of our eyes.” He meant that Amazon shoppers are becoming more and more likely to use the site for everyday things.
This point is supported by a new PMG study that shows that during Amazon’s recent July Prime Day event, the health and household area saw its share of sales rise, while categories like electronics and clothing and accessories fell.
Numerator, a market researcher, also said that during previous Prime events, cat food and dish soap were among Amazon’s best-selling items. Amazon has also been advertising deals on lightbulbs, medicines, and cat litter before the October Prime Big Deal Days sale, which is like the July event but before the holidays.
But another number from Numerator may really tell the tale: an all-time high 83% of U.S. families now shop on Amazon. It was only 76% four years ago.
Also, it’s important to note that Amazon now has about 200 million Prime users around the world, according to numbers the company released in 2021. Amazon said that there were 100 million Prime users in 2018.
There is growth at Amazon even though it has to deal with competition from another big store in the online market. For example, Walmart WMT -2.27% started its Walmart+ membership program in 2020. It has perks like Amazon Prime, like free shipping. Target TGT -2.54% recently joined the club with its Target Circle 360.
Analysts stress that Amazon’s growth, at least in terms of home penetration, is directly linked to its move into selling household goods. That is, people are more likely to shop at Amazon because it sells basic items, just like they did with traditional stores for many years.
“It’s like a grocery store,” says Bruce Winder, a retail expert.
Some people think Amazon will have trouble in the future, especially since home goods have lower profit margins than many other types of goods. But that hasn’t stopped the trend.
Amazon’s CFO Brian T. Olsavsky said earlier this year that people are buying “a lot more consumables and everyday essentials.”
A lot of people, including analysts, say that Amazon’s success at selling household goods comes from three main things: the range, the prices, and the speed of delivery.
The part about choices is pretty clear to anyone who has shopped on Amazon. Not only does the company sell those products, but it also sells a pretty wide range of them. That being said, the company says it gives 300 million items, both necessities and extras, with free Prime shipping.
People can choose from a lot of well-known brands of toilet paper, like Scott, Charmin, and more. They can also stick with Amazon’s own Basics brand. More than 100,000 of these six-packs have been bought on Amazon in the last month alone, making them the best-selling health and home item.
‘You’re seeing a behavioral change right before our eyes.’
Sam Bloom, PMG’s head of partnerships
The story is more than just choosing, though. People may also be drawn to Amazon because of its low prices. An e-commerce researcher named Profitero did a study that showed Amazon is the cheapest place to buy many important things online, like vitamins and baby goods. Walmart was usually the second best option in these situations, but Amazon was 1% to 4% cheaper. (Walmart officials didn’t answer multiple calls for comment.)
In fact, some experts say that Amazon’s shipping time might be what brings in the most customers. The company has built up a large network of warehouses and delivery trucks that help it get things to customers faster. As proof, Amazon says that in the first half of 2024, more than 5 billion things arrived the same day or the next day around the world, which was 30% faster than the same time last year.
People are more likely to buy even one item of, say, dish soap on Amazon because of this. The argument goes like this: Why go to a store in person when the item will be delivered to your door in hours and you already paid for a Prime membership that includes free shipping?
Amazon can ship those things for a low cost thanks to the delivery network. Laura Martin, an internet expert at Needham & Company, says that Amazon already has the trucks and workers it needs, so adding another package, even if it’s just that one with the dish soap, doesn’t really make the costs go up. It still makes some money, though.
Martin pointed to the well-known dish soap brand and said, “They’re happy to sell you that Palmolive.”
It’s not that Amazon doesn’t have problems here. The profit-margin problem may be the most important one.
Gil Luria, an analyst at D.A. Davidson who studies Amazon, explained it this way: “A box of dishwasher detergent could make $4 of profit and a gaming console could make $100 of profit at the same 20% markup and the same box size.”
When Amazon revealed that its revenue for the second quarter of 2024 would be lower than what analysts had expected, Olsavsky said that this was because customers were “being careful with their spend,” which again may favor everyday necessities over non-essentials.
It was clear that investors didn’t like that possibility: the company’s stock dropped about 20% in the days that followed, but it has since risen again. Some experts think that shoppers might be more generous with their money this holiday season. It’s also important to remember that Amazon’s October sales event will include more than just necessities; it will also include more expensive items.
Other people, including customers, see a different problem with Amazon sending out all those billions of packages. Specifically, the damage that could be done to the earth by all the fuel and packaging that is used.
A person from Norwalk, Connecticut, named Ann Magnin said, “There is definitely a downside.” Magnin doesn’t shop on Amazon.
Amazon defends its environmental record by pointing to recent steps it has taken to lessen its effect on the world, such as using paper filler instead of 95% of the plastic air pillows in North American delivery boxes.
“We do both every day,” an Amazon spokesperson said. “We can innovate for customers and advance sustainability initiatives at the same time.”
Some analysts say that Amazon’s growth chances may be more important than its ability to make customers depend on it more and more, for everything from basic needs to more complex items. AWS, the company’s cloud platform, and other parts of its business have become more important. “Amazon is a services company (i.e., advertising, cloud, Prime Video, etc.), NOT a products company, and e-commerce is all about products,” Martin, a Needham analyst, wrote not long ago.
But try saying that to Marla White, who lives in Southern California and buys vitamins, laundry detergent, and dog supplies on Amazon.the list of important things goes on and on. When White is in a hurry and needs something fast, she says she can get it delivered the same day through Amazon.
She said, “I’m like, ‘God love you.'”
