Amazon Locked In Price War, Eyes Toys R Us For Retail Sites
E-commerce behemoth, Amazon has come under fire for offloading rising shipping and transportation costs onto suppliers, coupled with reports it’s restricting the number of single, low-cost items sold on its marketplace.
According to Bloomberg, sources claim Amazon is looking to increase transportation fees for bulky products, and may be amidst a margin-focused price war with suppliers.
Some Australian suppliers speculate the e-commerce giant may be favouring some brands over others within niche product categories.
The company is also facing allegations it may soon make it harder for buyers to purchase small orders of inexpensive, low profitability items.
Amazon has historically been willing to absorb significant product losses, in a bid to outperform competitors (e.g. Walmart), however, some commentators speculate its recent actions may indicate the strategy is becoming unsustainable.
Last year, Amazon’s fulfilment expenses soared 43% to $25 billion, and surpassed revenue growth of 31%.
Bloomberg also states the e-commerce giant is now heavily scrutinising delivery costs for each item, and is offloading more of these costs onto vendors – e.g. Procter & Gamble.
Despite its alleged battle with suppliers, Amazon’s fight against American rival, Walmart, is suspected to be a driving force in its commitment to further drop prices. According to e-commerce analytics firm, Profitero, in a study of 20,000 products, Walmart’s prices came in just 1.8% higher on average.
The news follows speculation Amazon may open branded retail outlets at former Toys R Us sites. The now bankrupt toy retailer announced it was closing its American stores last week.
Toys R Us’ UK stores are also being closed, with reports suggesting its Australian outlets will also be liquidated.
Physical retail stores will likely enable Amazon to showcase its range of ‘Echo’ smart home devices, and display the integration of its smart voice assistant, ‘Alexa’, in third-party devices.
The development of a physical store network will likely reduce Amazon’s shipping and transportation costs, and relieve financial pressure on suppliers.
Back in 2015, Amazon entered discussions to acquire several RadioShack sites in America – following the company’s bankruptcy – however nothing amounted from the talks.