Amazon (NASDAQ: AMZN) has built its brand around fast shipping speeds and getting products to customers as quickly as possible. Many brick-and-mortar stores simply can't compete against the online retail giant.
But by focusing mainly on speed, Amazon has potentially overlooked customers who are more value-oriented and prioritize a low price more than fast shipping. And those customers have been going to cheaper Chinese e-commerce sites to save money. Amazon, however, appears to be taking notice. And it's going after those shoppers with its latest move.
Amazon to launch a service targeting bargain hunters
Whether you need books, home goods, or even groceries, you can often find what you need on Amazon. But if you're looking for ultra-cheap deals and ways to save, you might be tempted to use Shein or Temu -- which PDD Holdings owns. Those sites lure in shoppers with alarmingly low prices. The one downside is often longer shipping times than you might be used to with Amazon, which offers same-day delivery in some markets.
But Amazon appears to be paying more attention to these sites nowadays. According to The Wall Street Journal, the online retail giant is reportedly looking to launch a new service that will target cheap fashion and other products that ship directly from China. It won't offer its usual fast shipping as the orders could take between nine and 11 days, but it will potentially lessen the incentive for shoppers to go outside of Amazon's marketplace in pursuit of low-priced deals.
The company's growth rate could get a much-needed boost
Offering a service with slower delivery may run counter to Amazon's strategy, but it gives the company a way to compete against Chinese e-commerce sites. It's also targeting a different type of consumer who prioritizes price above shipping times. And it can potentially be a big market for Amazon. Last year, PDD Holdings reported revenue of just under $35 billion, and its top line nearly doubled from the previous year. In addition to Temu, PDD also owns Pinduoduo.
As consumers become more price-conscious during more challenging economic conditions, there's the potential for this to be an even hotter growth opportunity in the months and quarters ahead. For Amazon, targeting cheaper goods could be a key way for the company to not only grow its business but to prevent its growth rate from slipping further. While Amazon has been achieving double-digit growth, business has slowed considerably compared to where it was a couple of years ago.
AMZN Revenue (Quarterly YoY Growth) data by YCharts
Should you buy Amazon stock today?
Shares of Amazon are up around 30% this year with the stock recently hitting a $2 trillion valuation. Although it trades at more than 50 times earnings, it can still make for an attractive stock to own in the long term, especially as it focuses more on bargain shoppers.
Going head-to-head against Temu and Shein could be a great move for Amazon to help generate more revenue growth and incentivize shoppers to remain on its site. And offering more reasons to use its site also helps enhance the value proposition of an Amazon Prime membership, which could result in more users signing up for Prime.
Overall, this looks to be a great move for Amazon, and it's one I think could pay off significantly by leading to stronger revenue growth in the future. And with heightened growth prospects, that makes this already solid e-commerce stock an even better buy today.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
