Discount and dollar stores have largely been immune to the so-called retail apocalypse.
Chains like Dollar General (NYSE: DG) and Ollie's Bargain Outlets (NASDAQ: OLLI) offer a mix of low-cost household essentials, gift items, and impulse buys. By offering cheap items and being well-located, these two companies, along with other low-cost retailers, have filled a niche.
These chains service customers who probably don't join the $99-a-year Amazon (NASDAQ: AMZN) Prime. They may shop at the online retailer, but only when making a purchase that qualifies for free shipping.
Now, Amazon has launched a section of its app and website offering items for $10 and under with free shipping. It's a below-the-radar, not promoted effort, but it's a quiet attempt to see if the online giant can tap a new customer base.
What is Amazon doing?
The new section launched without any fanfare. That suggests the online retail leader is merely putting a toe in the water -- although when a company is as large as Amazon, even a toe can create big ripples.
In the section, which is called "$10 & Under with Free Shipping," there are seven categories -- women's, men's, electronics, gifts, home decor, household, and watches. Visitors to the new area also have the option to view all the merchandise in the category. It's an interesting mix of stuff ranging from all sorts of clothing to smartphone cases, and laundry detergent.
You do not have to be a Prime member to shop in the new section. In fact, the category seems exempt for Prime and orders ship using "free economy shipping," a service which had an estimated delivery of Feb. 12-20 for a t-shirt ordered on Feb. 5.
What's it like?
In many ways, browsing through the $10 and under section feels like walking around an Ollie's or a Dollar General. For pure-digital shoppers, it's not unlike the Wish shopping app, which has a similarly eclectic (albeit more expansive) array of items.
You come across some things you need and a few you may just want. It's perhaps not as fun to explore items for sale in this way online as it is in store, but Amazon has created something that's at least a reasonable approximation of the appeal of those stores.
At the moment, this has to be considered a soft launch. Amazon isn't hiding the new section, but it's also not easy to find and it's not an area most people would stumble upon. A spokesperson for the company shared how to find the section in an email to The Motley Fool.
- On Mobile: hamburger menu -> programs & features -> $10 and Under
- On Desktop: departments -> Full Store Directory -> $10 and Under within some categories (e.g. Home)
Will it work?
Part of the reason dollar stores work is because they offer immediate gratification as well as the ability to discover things you want to buy, but may not really need. You might enter either store needing paper towels of coffee pods and leave with a new slow cooker or a scarf.
The challenge for Amazon is whether consumers will respond the same way when they have to wait a week or even two for delivery. It's very possible that the impulse purchases get made, but by the time they arrive the recipient wonders why he or she made the purchase to begin with.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.