Amazon Briefing: Week of July 4th

Prices fall on weak demand ahead of Prime Day.

Amazon Briefing: Week of July 4th

Exec Summary

Prices on Amazon fell for the second-consecutive week last week, as the online retailer tries to sell-through excess inventory ahead of Prime Day in the coming days. We believe inventory is extremely elevated across categories, which is why Amazon is already considering holding a second Prime Day event later this year.

Meanwhile, consumer demand also declined slightly last week, which is never a good sign in tandem with lower prices. What we’re watching for is to see if consumers are holding off on purchases until Prime Day or if elevated prices in other parts of the economy (e.g. energy) are resulting in lower spending in retail.


Prices

Prices declined across all major categories last week, except the Beauty category. The biggest price cuts were found in the Pet, Baby, and Personal Care categories, driven by promos on excess inventory.

Demand

Overall consumer demand declined slightly last week, with the biggest pull-back in purchases occurring in the Beauty and Baby categories. Meanwhile, demand was up in the Pet and Health categories.

Category Insights

Baby: Prices declined sharply by -6.68% last week in the Baby category. Demand was also lower by -2.63% week-over-week. Lower prices could be a sign that Amazon is trying to recapture shoppers after a baby formula shortage sent them shopping elsewhere.

Beauty: Prices increased +3.95% last week in the Beauty category, which drove down demand by -4.63%. There is a strong inverse correlation between prices and demand in the Beauty category as shoppers are extremely price sensitive when it comes to discretionary purchases on Amazon.

Grocery: Both prices and demand remained relatively flat week-over-week in the grocery category (although the Snack Foods segment was up +3.02%). This was somewhat surprising given the lead-up to the Fourth of July holiday weekend; we would have suspected very high demand for food and beverages but it doesn’t appear Amazon captured much of that spending.

Health: Prices were down in the Health category for the second consecutive week on Amazon. We noticed shoppers continuing to decrease spending in OTC Medications, which includes vitamins, supplements, and other discretionary health purchases. If demand dries up more broadly across retail, we would expect discretionary purchases to be hit the hardest.

Household: Prices declined -2.54% in the Household category last week while demand also decreased -1.54%. The biggest pull-back in spending was seen in the Cleaning segment. Consumers may be planning to stock-up on Household items during the upcoming Prime Day event.

Personal Care: Prices declined -3.08% in the Personal Care category last week while demand was relatively flat. We saw lower prices in both the Hair Care and Skin Care segments. Demand was stronger in Hair Care than Skin Care, which is a reversal from the trend we had been observing the previous few weeks.

Pet: Prices of Pet Care items declined sharply by -7.69% week-over-week which led to demand up +2.21%. The Pet Care category had seen some of the fastest-rising prices in early Summer — especially within the Dog Food segment — but prices now seem to be rolling over.

Methodology

Hibben has developed its own basket for tracking prices and demand for consumer goods on Amazon. We start by estimating sales for millions of items on Amazon each week. Then we assemble an equal-weighted basket of 3,500 goods using the 500 top-selling items from each of the seven major CPG categories. We refresh this process weekly to ensure that our basket tracks the top-selling items that week. Weekly timeframes are defined by the seven days spanning Saturday-Friday of each week. All figures are estimates as our pricing and demand models rely on a combination of first-party and third-party data, as well as analyst assumptions.