Online giant takes on Walmart with big Prime discount
The battle for low-income shoppers is heating up.
Amazon announced that individuals participating in government assistance programs can sign up for Amazon Prime membership at the discounted rate of $5.99 per month. The regular annual membership for Prime is $99 per year, or $10.99 a month for those who prefer to pay on a monthly basis.
To date, Prime's growth has largely been fueled by upper-middle and upper income shoppers. But with the new discount, Amazon is directly going after an audience segment that has long been a stronghold of Walmart: lower income customers.
“Amazon is not content existing within the confines of the more affluent customer base utilizing Prime today and is looking to expand into the lower income households that it has had trouble penetrating,” commented Matt Sargent, senior VP of retail at Magid, a global consulting firm. “Less than 25% of households making less than $25,000 subscribe to Amazon Prime, contrasting the fact that 60% of consumers making the same income regularly shop Walmart. Amazon recently announced the ability to engage with customers with poor credit through Amazon Cash and is now taking this a step further with a discounted Prime offering.”
At launch, customers will need a valid electronics benefit transfer (EBT) card to qualify for the Prime discount. (The card is commonly used to disburse funds for several government assistance programs, including Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and Women, Infants, and Children Nutrition Program (WIC) EBT, however, cannot be used to pay for membership.
Amazon said it will add other ways to qualify in the future for customers participating in government assistance programs that do not utilize EBT. There is no annual commitment and members can cancel anytime.
“We designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible, including the many conveniences and entertainment benefits of Prime,” said Greg Greeley, VP of Amazon Prime.
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Study: E-commerce returns experience critical to shopping journey
E-commerce sales may be hitting all-time highs, but the key to success is seamless online returns processes.
This was according to “Making Returns a Competitive Advantage,” a report from Navar. The report is based on responses from 700 U.S. consumers who returned an online purchase in the past 12 months.
According to the report, online sales hit nearly $400 billion in 2016. If retailers want to continue wooing shoppers, they need to nail online returns — especially for those under the age of 30.
Millennials (approximately 75.4 million in the U.S. alone) make 54% of their purchases online. They are also making more online returns than ever before — and many retailers are not meeting their expectations.
In fact, 48% of millennials said returns are a hassle. As many as 60% keep purchases they dislike because they don't want to deal with returning them — this is 18% higher than shoppers over the age of 30, the report revealed.
High-income shoppers have similar perceptions and behaviors when it comes to returns. They are also 1.5 times more likely than the average consumer to return an online purchase.
"Returns are the new normal," said Sucharita Mulpuru, a retail industry analyst who collaborated with Narvar on the study.
"Most shoppers are frequently returning online purchases, while remaining loyal to brands if they have a positive experience,” Mulpuru said. “Retailers who want to remain competitive will find ways to reduce friction in the returns process, whether that's communicating more updates, providing more transparency, or offering free return shipping.”
One reason for increased online returns is the trend of “bracketing,” when shoppers “buy to try,” with the intention of keeping their favorite item and returning the rest. This trend is most common among millennials, high-income and female shoppers. It is also most prevalent among the apparel and home goods categories.
Currently, women — especially those under the age of 30 and high-income shoppers — have done bracketing this in the past year, compared to 30% of men. Meanwhile, 45% of shoppers aged 18-29 have done this in the past year, compared to 38% of shoppers over the age of 30. Among high-income shoppers, (those who make more than $100,000/year) 48% have done this in the past year, compared to 31% of the rest of the population, according to data.
Retailers that can make this process easier will gain a competitive advantage. Shoppers like returning items to stores so they can get immediate credit (35%) and shop for other items (28%) —this is especially true for high-income consumers and shoppers under the age of 30, the report said.
Traditional retailers also have a leg up on online retailers, like Amazon, that require complex return processes, such as contacting the retailer for return authorization. However, the e-commerce giant also provides greater transparency into the process, further earning the loyalty of shoppers.
For example, 75% of Amazon shoppers gave the experience a 4 or 5 on a five-point scale, compared to 70% of overall survey respondents. Meanwhile, 32% of Amazon consumers like tracking their return package, versus 25% overall; 45% like that they are informed when their refund is processed (compared to 25%) and 34% receive updates on the status of their return (compared to 15%).
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Convenience store retailer’s Q4 misses Street
Despite 16 consecutive years of positive same-store sales growth among key categories, Casey’s General Stores’ top and bottom line revenues missed the mark in the fourth quarter.
For the period ended April 30, the convenience store chain reported total revenue of $1.85 billion, just shy of analysts’ estimate of $1.87 billion. Diluted earnings per share for the quarter were $0.76, a drop from $1.19 for the same period a year ago. This also missed analyst expectations of 82 cents a share. Meanwhile, net income hit $30 million, compared with $47 million in the same period last year.
For the fiscal year, diluted earnings per share were $4.48 versus $5.73 for the same period last year. However, the company hit a milestone as it ended its fiscal year, achieving its “16th consecutive year of positive same-store sales growth in both the grocery and other merchandise, and prepared food and fountain categories," said Terry Handley, the chain’s president and CEO.
Specifically, in fuel, same-store gallons decreased 0.5% with an average margin of 17.2 cents per gallon. The company sold 15.5 million renewable fuel credits for $7.1 million in the fourth quarter.
For fiscal 2017, total gallons sold were up 5.6% to 2.1 billion. Gross profit was down slightly to $378.3 million, primarily due to a 1.2 cents per gallon lower fuel margin partially offset by an increase in gallons sold.
In grocery and other merchandise, fourth quarter same-store sales were up 1.5% with an average margin of 31.1%. For the year, total sales were up 5.7% to $2.1 billion and gross profit dollars increased 4.4% to $657.2 million.
Prepared food and fountain same-store sales were up 3.2% for the quarter, with an average margin of 61.7%. For fiscal 2017, total sales increased 8.3% to $953.4 million, and gross profit dollars rose 7.9% at $594.0 million.
The company also continues with its aggressive store expansion and renovation plan. For the fiscal year, Casey’s built and opened 48 new stores, acquired 22 stores, completed 21 replacements, and remodeled 103 stores. As of April 30, there were 27 new stores, 21 replacement stores, and 11 major remodel stores under construction.
At fiscal year end, Casey’s had 116 sites under agreement for new store construction and five acquisition stores under agreement to purchase. "We also recently opened our first store in the state of Ohio,” Hadley added. “We are optimistic about our growth opportunities.”
Looking ahead to fiscal 2018, the company plans to increase same-store fuel gallons sold by 1.0% to 2.0% with average margin of $0.18 to $0.20 cents per gallon. Same-store grocery and other merchandise sales will increase 2.0% to 4.0% with average margin of 31.0% to 32.0%. Same-store prepared food and fountain sales will grow 5.0% to 7.0% with average margin of 61.5% to 62.5%.
Finally, the chain plans to build or acquire 80 to 120 stores, replace 30 existing locations, and complete 75 major remodels.
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