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Amazon has made a point of targeting low-income customers

Amazon has made a point of targeting low-income customers
29 Jan 2018

Retail giant Amazon opened its cashier-free grocery store, Amazon Go, on Monday in Seattle, and with it opened a controversy about low-income shoppers. The store doesn’t accept food stamps, and shoppers are required to check out of the store with a smartphone, a device that lower-income people may not be able to afford.

Some Twitter users expressed anger about this, saying that not accepting food stamps excludes people who can’t pay by smartphone from the store. “With food stamp EBT cards there is no reason you can’t have a self-checkout counter in your Amazon Go stores just for people with food stamps,” one Twitter user wrote. “In time maybe there will be a food stamp smartphone app.”

(A spokeswoman for Amazon AMZN, +1.44%   confirmed the store cannot accept food stamps.)

Low-income consumers especially benefit from inexpensive grocery options, said Clinton Key, the research officer for savings and financial security at Pew Charitable Trusts, a nonprofit based in Philadelphia, because they spend a larger percentage of their incomes on food prepared at home than people with higher incomes do. Not accepting payment through EBT cards can severely limit their options.

But Amazon.com has made a point of targeting low-income consumers

In 2017, the company announced it was offering its Prime membership, which gives consumers access to services including free shipping and Amazon-exclusive television shows, for $5.99 a month to consumers who are on government assistance programs.

As of 2018, Prime costs $12.99 a month for consumers who aren’t on assistance; or, for those who choose to be billed on an annual basis, it costs $99.

And, even at that discounted price, that may not be a good thing. Subscription services like Amazon Prime can be difficult for families that budget carefully and can’t predict what their income will be each month, Key said. “Households of all incomes have relatively little slack in their budgets,” he said.

Amazon Cash also appeals to ‘underbanked’ Americans

Also last year, Amazon announced a program called “Amazon Cash,” that allows people to add money to their online Amazon accounts by purchasing what is essentially an Amazon gift card. That system would likely appeal to people who don’t have a debit or credit card.

In fact, about 7% of households in the U.S. are “unbanked,” meaning they don’t have any type of banking account at an insured institution, according to the Federal Deposit Insurance Corporation. An additional 20% of households are “underbanked,” meaning they have a bank account, but look outside the banking system to meet other financial needs, including lines of credit.

Amazon wants to compete with Wal-Mart

Retail experts said offering the discounted Prime membership seemed to be an effort for Amazon to compete with Wal-Mart WMT, +1.05%  . Shoppers who use the Supplemental Nutrition Assistance Program (SNAP) spent $13 billion at Walmart in 2016 and accounted for 18% of the money spent on that program, according to The Wall Street Journal. (Wal-Mart offers many financial services inside its stores, including check cashing and issuing prepaid debit cards.)

Source: Market Watch
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Marijana