Amazon's defence against tariffs for its coming Prime Day? Luxury goods.
President Donald Trump's tariffs have spurred some Amazon sellers who source products from China and other heavily tariffed countries to bow out of the company's Prime Day, one of its biggest sales events of the year, to protect their margins.
The Seattle-based e-commerce company is hoping that recent sales growth in high-margin cosmetics in its Amazon Premium Beauty category will cushion the impact of tariffs on Prime Day sales revenue and consumer sentiment.
"Beauty has become, in the past few years, more of an essential item in consumers' minds," even in hard financial times, said Anna Mayo, vice president of NielsenIQ's Beauty Vertical unit.
Amazon Premium Beauty was initially shunned by luxury cosmetic players who feared the platform would harm their image when it was launched in 2013. But those days are gone. Now, the online retailer is promoting products from top beauty and haircare brands including Estee Lauder's Clinique, Olaplex and L'Oreal's Urban Decay.
During last year's Prime Day event, US shoppers spent $14.2 billion, up 11 per cent year-over-year, according to Adobe Analytics.
Top cosmetics brands can charge high prices and often do not offer steep discounts on Prime Day compared with electronics, apparel and home goods. This year, Adobe Analytics expects beauty product discounts to have "milder" discounts of 10 to 17 per cent, whereas electronics deals are expected to range from 14 to 22 per cent off, said Vivek Pandya, lead analyst at Adobe Digital Insights.
That, coupled with the ease of shipping small packages of most products, means that Amazon Premium Beauty merchandise has higher margins than other products sold on Prime Day.
Amazon "doesn't make a huge margin in most of the categories of stuff that it sells online," said Renee Parker, co-founder of consultancy firm Invinci and a former Amazon executive. "They are making a lot of money on premium beauty products because (they're) small and expensive, and you can ship a ton of them." Vitamins and supplements are successful for similar reasons. Reuters
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