How's Amazon's Dip?

$Amazon.com(AMZN)$ has experienced a three-day consecutive decline, bringing its stock price back to the closing price after the Q2 financial report was released. Compared to other tech giants, Amazon has a closer connection to the macroeconomy. The recent pullback in the stock also reflects several events that have impacted the company's performance in recent days.

First, Amazon made preparations ahead of shopping festivals by increasing its workforce and proactively raising wages. The company plans to invest $1.3 billion this year to improve the compensation of customer fulfillment and transportation employees, raising the average hourly wage for these roles to over $20.50. These wages have increased by more than 50% over the past five years. In some locations, customer fulfillment and transportation employees will receive compensation as high as $28 per hour. Amazon intends to hire 250,000 full-time, part-time, and seasonal fulfillment center and transportation personnel in the United States ahead of the holiday season, especially for seasonal positions.

Amazon has been increasing hourly wages every year, investing over $10 billion in wages over the past five years. This year, Amazon continues to invest in employee benefits, adding several new benefits, including a new emergency savings plan and a financial assistance pilot program, saving nearly $20 million for customer fulfillment and transportation employees—all of these benefits are available from the first day of employment.

Second, the impact of strikes by some drivers is also a factor. This reflects the recent wave of strikes, including truck drivers. The last-mile delivery is crucial for Amazon, and some departments have the freedom to set their wages and incentives. Previously, Teamsters attempted to organize strikes among Amazon delivery drivers, and multiple Amazon warehouses set up protest groups, calling for the company to address low wages and unsafe working conditions.

Third, there is a new membership program for medical health and groceries. This program includes separate grocery and healthcare membership plans, as well as the possibility of integrating One Medical's primary healthcare services with Prime, which may be launched by the end of this year and will increase membership fees. Amazon Prime in the United States has raised its annual price to $139, with a global membership exceeding 200 million.

Fourth, energy prices are rising again, causing further strain on people's expenses. Many consumers are cutting back on spending, so some discount and promotional websites and companies are experiencing rapid growth. Amazon is also trying to attract young customers and low-income families to use its Prime membership program in this competitive trend.

About Prime Membership

Amazon's Prime Day and Prime Early Access strategies appear to be achieving their intended goals—driving more Prime memberships and increasing the wallet share of Prime members (from other retailers).

With an annual GMV of over $500 billion and over 100 million Prime members in North America, these promotional events are starting to manifest in broader economic data, such as the growth in U.S. non-store retail sales in July. U.S. consumers also felt the pressure of rising oil prices and overall inflation in July, which may have diminished the effectiveness of Prime Early Access. Physical retail competitors are also launching some promotional activities matching Prime Day and Early Access.

Amazon's retail business will continue to grow steadily. The company has increased choices through new initiatives like Buy With Prime and has recently added a large number of merchants through Shopify Inc (SHOP). It is also improving fulfillment and transportation efficiency by adopting new regional network approaches in the United States while speeding up delivery times.