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Amazon's Market Maneuvers: TikTok Partnership and Social Commerce Strategy Amid Economic Challenges

AInvestMonday, Aug 12, 2024 4:02 am ET
2min read
Amazon (AMZN) has seen a slight uptick of 0.69% over the past week, marking a four-day consecutive rise amounting to a 3.68% increase. However, for the week, the stock dipped 0.57%. Since the beginning of the year, Amazon's share price has risen by 9.87%, bringing its market capitalization to $1.75213 trillion.
In recent trading, large technology stocks have generally risen, with Amazon seeing a surge of over 3% by Wednesday. Other tech giants such as Microsoft, Apple, Nvidia, and Meta Platforms witnessed gains as well, contributing to the rally in the broader market indices, with NASDAQ up nearly 2%, S&P 500 increasing by 1.5%, and the Dow Jones rising by 1%.
In related news, Morgan Stanley adjusted its rating for Amazon.com, maintaining an overweight rating but lowering the target price from $240.00 to $210.00. This reflects a cautious outlook and recalibration amidst changing market conditions and valuation metrics.
On the business front, Amazon has been proactive in enhancing its service ecosystem. A recent announcement highlighted the inclusion of YiBa Supply Chain into Amazon’s SPN (Solution Provider Network), a significant endorsement of its service quality and logistical capabilities. This move promises better, more efficient export logistics services for Amazon's broader seller base, aligning with its commitment to streamline cross-border trade.
A major recent development for the company is its collaboration with TikTok. The cooperation aims to integrate e-commerce directly into the TikTok app, allowing users to browse and purchase Amazon products without leaving the platform. This collaboration is seen as mutually beneficial, potentially boosting Amazon's sales while providing TikTok new avenues for monetization and alleviating regulatory pressures in markets like the US.
From an operational perspective, users will be able to see Amazon product recommendations within TikTok’s "For You" page. Linking their TikTok account with their Amazon account will enable seamless purchases directly within the TikTok app. This integration also boasts real-time product details including pricing, Prime eligibility, and delivery estimates, enhancing the user shopping experience.
This collaboration is a strategic move for Amazon to capture more mobile commerce-driven revenues, especially targeting the younger demographic who rely heavily on social media for product discovery and purchase. For TikTok, this partnership helps fortify its commercial activities with the robust and widespread supply chain of Amazon.
Facing economic headwinds and intensified market competitions, Amazon is actively seeking new growth avenues. Despite its enormous scale, growth in its core e-commerce business has slowed, as evident in its Q2 fiscal 2024 report which showed a 4.6% year-over-year growth in net sales, slightly missing analysts' expectations.
Amazon is also tapping into the rapidly growing trend of social commerce. Research predicts that the market size of social commerce will expand significantly in the coming years. This has prompted Amazon's efforts to explore new channels for growth, including its latest tie-ups with social media giants.
In addition to TikTok, Amazon has similar agreements with Pinterest and past collaborations with Meta's Facebook and Instagram, leveraging these platforms to facilitate direct purchases without leaving the application. This multi-faceted approach is an attempt to reclaim ground from emerging competitors like TikTok Shop.
CEO of Ningbo Oriental Trade, Zhu Qiucheng, indicates that this partnership with TikTok compensates for the latter’s supply chain limitations while offering Amazon diversified traffic streams. Studies show that a significant portion of Gen Z users prefers discovering products on TikTok, suggesting potential positive outcomes for both parties.
To further enhance its market position, Amazon is also considering launching "low-price stores," focusing on affordable, non-branded merchandise priced under $20. This initiative, along with reduced commission rates for lower-priced clothing items, aims to attract more sellers and consumers by offering cost-effective options amidst economic downturns.
In summary, Amazon's strategic alignments with major social media platforms and innovative market approaches reflect its efforts to maintain market leadership and respond adaptively to evolving consumer behavior and competitive dynamics. How these efforts will translate into long-term value will be closely monitored by investors and industry analysts alike.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.