Amazon Knows It Needs Low-Income Customers Especially For Its Grocery Business

Controversy was ignited when it became apparent that Amazon’s first cashier-free Go store, which opened in Seattle, Washington last week, will not be accepting food stamps at least for now. This was seen as being disadvantageous to low-income Americans as they may not own smartphones which are required for checking out at the high-tech retail outlet.

According to some this was interpreted to mean that the online retail giant was not interested in the low-income demographic. However this cannot be further from the truth. One example of Amazon’s commitment to this demographic is the retailer’s move to discount Prime membership. This is because Amazon cannot afford to ignore low-income shoppers especially with regards to groceries.

Home-cooked food

According to Pew Charitable Trusts families or households in the low-income category spend an inordinately huge amount of their money on food as they tend to consumer more home-cooked food compared to families or households with higher incomes. At Walmart in 2016 shoppers who were on food stamps spent approximately $13 billion at its retail outlets.

The opening of the Amazon cashier-free store comes a few days before the e-commerce giant releases its earnings report for Q4. Analysts are expecting earnings per share to hit a figure of $1.84 while sales are expected to reach $59.8 billion. Despite being heavily watched there is no consensus on whether the Seattle, Washington-based online retailer will beat or miss the estimates.

Operating income margin

With regards to the cloud computing division of Amazon, AWS, Wall Street is expecting revenues at the division to grow at a rate of 40% from a similar period last year. Operating income margin for the quarter on the other hand is expected to be in the range of 25% and this would match past performances. In Q1 for instance sales grew at a rate of 43% while in Q2 it grew at a rate of 42% which was also the growth rate for the third quarter. Last quarter the operating margin income of Amazon Web Services came in at 25.5%.

The numbers that are being predicted for AWS are the same ones that are expected for the wider industry as across the cloud computing analysts are expecting revenues to go up by 43% from a similar period last year to reach a figure of $54 billion.

One factor that could cause Amazon Web Services to miss the estimates though is the fact that growth could slow as its acquisition of Wholes Foods Market has resulted in rival Walmart warning suppliers against using AWS.

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