Amazon.com, Inc. (NASDAQ:AMZN), known for offering discounts on its products, in a rare move is reducing the price of products sold by third-party retailers to rack up sales this holiday season. Amazon’s discounts will help third-party retailers to compete with low-priced competitors, such as Wal-Mart Stores Inc.
Amazon discounts – a smart move to boost holiday sales
Amazon discounts are applicable on board games and gadgets offered by merchants during the holiday season. “When Amazon provides a discount, customers get the products they want at a price they’ll love, and small businesses receive increased sales at their listed asking price,” Amazon said in a statement to Reuters.
According to the Wall Street Journal, Amazon is offering a discount of up to 9% on items sold by third-party sellers on its site, “ratcheting up a price war with other retail giants—and potentially straining its relationship with some sellers.” Some retailers, however, believe Amazon discounts devalue their products.
By offering Amazon discounts on the items sold by third parties, the company is taking the price war a notch higher. Amazon’s strategy just could click with customers with holiday sales fast approaching. Online shoppers will see the tag, “Discount provided by Amazon” on the third-party items available on discount.
This comes as a rare event from Amazon, who usually offers a discount on its own products. Just a few weeks back, the retail giant announced a hefty cut of $30 from the price of Kindle as the e-reader approaches its 10th anniversary on Nov. 19. Under the deal, the standard Kindle priced at $79.99 was offered for $49.99; Kindle Paperwhite price was reduced to $89.99 from $119.90; Kindle Voyage was sold for $169.99 rather than $199.99. The deal has now expired.
In addition, as November kicked in, Amazon came up with the Black Friday Deals Store, where customers can buy everything from toys to electronics. The page has a “Deals of the Day” section with deep Black Friday discounts on select items across a variety of different categories.
High-investment, low-profit strategy working
Last month, Amazon posted a whopping 34% increase in its quarterly sales to $43.7 billion for the three months ending September. The sales number came out better than Amazon’s own expectations of $42.1 billion.
The latest quarter results reflect the company is focusing more on the high-investment, low profit strategy, as the sales growth came along with a 35% jump in expenses, according to Financial Times. It looks like investors have also accepted the model as the stock surged 30% this year despite an increase in spending.
In a separate development, Amazon CEO Jeff Bezos offloaded 1 million shares in the company at a time when the stock is at an all-time high. According to the SEC filing, Bezos started selling the shares from Nov. 1 at an average price of under $1,100 each, shortly after the strong earnings report drove the stock 8% higher.
Bezos has sold stakes in his own company before, but still owns about 16% of Amazon, according to CNN. As of Oct. 27, Bezos was the richest person in the world with a net worth of over $90 billion.