Amazon warns of weak consumer demand, will Walmart's low-price strategy work?

According to the Zhitong Finance and Economics APP, as Walmart (WMT.US) is about to announce its latest quarterly financial report, its "Everyday Low Price" strategy will be put to the test. Previously, competitor Amazon (AMZN.US) warned that customers have begun to seek value for money, forcing the online shopping giant to provide a forecast for the third quarter continuing its soft trend.

On Friday, Amazon's stock price fell nearly 9% in pre-market trading, while Walmart saw a slight decline.

Due to the challenging inflation, many Americans are avoiding large expenses and opting to purchase discounted goods. Major retailers such as Target (TGT.US), Walmart, and Kroger (KR.US) have been working to lower prices of essential goods.

Although this has squeezed profit margins across the industry, Walmart's scale gives it greater bargaining power with suppliers. Some analysts suggest that Walmart's low-price strategy may ultimately attract consumers who avoid high-priced stores.

Neil Saunders, Managing Director of research firm GlobalData, stated: "(Amazon's performance) has sent a chill through the entire retail industry. That is to say, for value-focused retailers like Walmart, performance may be better because its products are more focused on basic items."

Walmart is set to announce its second-quarter performance on August 15, with quarterly revenue expected to grow by 4%. However, according to data from LSEG, this will be its slowest growth rate in nearly two years.

Amazon's financial report released on Thursday showed a slowdown in online sales growth in the second quarter, with consumers seeking cheaper shopping options, leading the online giant to forecast lower-than-expected revenue for the current quarter.

Amazon's CFO Brian Olsavsky stated during the earnings conference call: "Consumers are spending cautiously, reducing spending, looking for products with lower average selling prices, and seeking discounts. This situation persisted into the second quarter, and we expect it to continue into the third quarter."

Analysts at RBC Capital Markets in Canada stated in a report: "(Amazon) investors may link the decline in second-quarter retail business profit margins with soft third-quarter revenue guidance to create a narrative of intensifying discounting to attract even softer consumers - a narrative that is hard to refute."

Apart from Amazon, major packaged consumer goods companies such as Procter & Gamble (PG.US) and PepsiCo (PEP.US) also showed signs of slowing performance. Procter & Gamble's financial report revealed an unexpected decline in quarterly sales, while PepsiCo's performance did not meet analysts' expectations.

Analyst John Tomlinson from research firm M Science stated: "The non-essential consumer goods market is weak, and no retail or e-commerce company is immune."