Amazon's high-priced listings now feature installment payment options, mirroring strategies seen in domestic e-commerce. With a global decline in consumer spending power, this serves as a viable strategy.
Amidst the onslaught from platforms like Temu, Amazon is striving to cater to consumers and drive purchases. There's an escalating battle between multiple platforms, luring cross-border sellers into the fray to compete for more orders. Due to reduced consumption, more individuals prioritize price, resulting in a significantly higher growth in sales for lower-priced products compared to higher-priced ones.
The future of competition among e-commerce platforms will focus on pleasing consumers with lower prices.
The introduction of installment payment options on listings is Amazon's effort to stimulate consumer spending.
Recently, sellers discovered installment payment options on Amazon listings. Buyers can pay a certain proportion upfront and slowly pay the rest later. For example, a $60 product can be paid in 4 installments of $15 each, every two weeks, without interest.
Depending on the product price, some items are split into 12 or 24 payments. For instance, products over $100 show a 12-month installment plan, while those over $500 are divided into 24 payments.
This feature currently appears only on high-priced product listings, with prices exceeding or equaling $50. Some sellers' listings had this feature introduced several months ago, although many didn't notice, especially sellers dealing with lower-priced products.
According to informed sellers, installment payments involve the platform partnering with banks. When a buyer purchases a product, they pay a portion upfront, while the bank covers the rest with a loan. Buyers make installment payments to the bank gradually, yet sellers receive the full payment at once.
For sellers, this feature is relatively friendly. It aims to stimulate consumption and encourage consumers with limited disposable income to make early purchases.
However, some sellers worry about refund procedures. According to sources, during refunds, the money is returned to the paying bank to offset the bill.
This feature doesn't have negative implications for sellers; it's a collaborative boon between the platform and banks to benefit consumers.
This functionality resembles installment payment systems seen on certain domestic platforms. Many more sellers believe Amazon is aligning with domestic practices, following a trend where competition among cross-border e-commerce platforms, especially with the inclusion of Pinduoduo, Temu, and TikTok, has intensified.
The recent Black Friday sale was exceptional for TikTok, with the overall payment Gross Merchandise Volume (GMV) increasing by over 215%. On Black Friday alone, the GMV surged by 4 times, and SKU orders spiked by 1212%. In addition to the US market, TikTok Shop's cross-border e-commerce in the UK showed a GMV increase of 191%, with a Black Friday spike of 368%.
The third-quarter performance report released by the Pinduoduo Group has also been impressive. Its Q3 revenue hit 68.84 billion RMB, a staggering 93.9% year-on-year growth, with a profit of 15.5 billion RMB, an 18% surge in stock prices. Temu played a crucial role in this success.
In its over one-year existence, Temu has reached consumers in more than 40 countries and regions, with 200 million app downloads and 120 million users in September, half of whom are outside the US. Temu's Black Friday sale lasted over 40 days, offering each user a $200 coupon and the choice of three free items, with many products costing just a penny. Numerous sellers experienced a significant surge in sales, with some reaching thousands of orders per day.
Additionally, SHEIN, Shopify, and Walmart have shown similar exceptional performances. Each e-commerce platform is vying for more consumers, and Amazon is no exception. This year, Amazon has repeatedly updated its features and even subsidized purchases to stimulate more buying. The introduction of installment payments is yet another move to attract more consumers and encourage them to make purchases with minimal upfront costs.
Amazon's low-priced product sales have increased by 100%.
With the global consumer downgrade, consumers have reduced disposable income. A survey released by the University of Michigan on November 27th shows that short-term consumer inflation expectations have risen to a 7-month high this year, while long-term inflation expectations remain at highs since 2011.
According to the latest findings from the Federal Reserve on American household finances, the wealthiest 20% of Americans have depleted the additional savings they accumulated during the pandemic and now hold less cash than before the pandemic.
As consumers have less money, aside from installment payments, low prices are another stimulant for consumption. Amazon sellers' prices have been slashed in various categories, significantly dropping prices. A survey shows that sales of low-priced products have surged by 100%.
Jungle Scout's data suggests that over a quarter of consumers choose online shopping primarily for price comparison and finding the best prices. Over 70% of consumers claim that inflation affects their consumption, and prices are becoming the primary factor influencing their purchasing decisions. Looking at data from various Amazon categories, sales growth is faster for lower-priced products.
According to Amazon's best-selling product rankings, in the past 12 months, median prices for Amazon's headphone products have dropped by 15%, while unit sales have increased by 159%. Though both higher and lower-priced products have seen growth, headphones priced below the median have witnessed a roughly 45% year-on-year sales increase. In the last 30 days, the top five headphone brands with the lowest median prices have had the highest unit sales.
In Amazon's home and kitchen category, sales of small appliances like microwaves, pressure cookers, and air fryers have surged by 23% year-on-year, maintaining stable mid-level prices with a less than 1% decrease. Sales and revenue for lower-priced small appliances have grown by over 70%, surpassing high-priced products in the market.
Looking at sales of toys and baby products, the median price for certain types of toys has slightly risen by 5% year-on-year. Overall unit sales have increased by 30%. There's a remarkable difference in the sales trend between products priced higher and lower than the market median. In terms of both sales volume and revenue, lower-priced toys have witnessed growth rates over 300% higher than their higher-priced counterparts.
Similarly, sales trends for Amazon's small tools, dolls, diapers, health & beauty, fitness equipment, and televisions follow the same pattern.
Consumers today highly value saving money. Over 30% say their biggest savings come from using coupons or discounts.
For platforms and sellers, meeting consumer demands is one of the best ways to increase sales. Offering discounts during major sales events and providing coupons during other times has become a common practice to attract cost-conscious consumers.
With Temu's low-price strategy, consumers' purchasing behavior continues to evolve. More Amazon buyers are increasingly concerned about prices and discount levels. Faced with new consumer trends and competition from multiple e-commerce platforms, Amazon is attempting to attract consumers through features that favor consumer spending.
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