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Amazon feels the pricing heat from Walmart.com and Target.com

October 3, 2014 02:34 PM
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Though Amazon.com Inc. beats most other major retailers on product prices, its online prices in four categories are not as low as those of Wal-Mart Stores Inc. and Target Corp. a study released today shows.

The report from Wells Fargo Securities LLC and online price-tracking firm 360pi found that some of Amazon’s rivals are becoming more aggressive with their online pricing.

The report stems from a year-long analysis of the daily prices for some 100 SKUs offered by Amazon (No. 1 in the Internet Retailer Top 500 Guide) and nine of its retail chain rivals: Wal-Mart (4), Sears Holdings Corp. (5), Macy’s Inc. (8), Best Buy Co. Inc. (15), The Home Depot Inc. (16), Target (18), Kohl’s Corp. (23), Lowe’s Cos. Inc. (36), and RadioShack Corp. (317). The report focuses on four main product categories: clothing and shoes; electronics; housewares; and health and cosmetics.

The report finds that Amazon “largely remains the retail price leader for like-to-like items, but Wal-Mart and Target have lower online prices than Amazon” in those four categories, with the price differences widening as the two chains become more aggressive. For instance, the report notes that Wal-Mart, described as the “standout surprise,” has online prices approximately 10% lower than does Amazon as of August 2014, a significant improvement from 1% lower six months ago. Target’s online prices, meanwhile, come in at about 5% lower than Amazon’s and have remained at that approximate level for the past year.

Macy’s stands as another retailer noted for its recent aggressiveness on prices. A year ago the department store chain’s apparel prices hovered around 17% higher than Amazon’s prices. That gap has since narrowed to just 1% higher.

There was one important caveat to the pricing report: It does not take into account sales tax or shipping costs. The retail chains must charge sales tax to any online consumer who lives in a state where the retailer has stores, and that would cover most of the population. While Amazon doesn’t operate any bricks-and-mortar stores, it has grown its network of distribution centers aggressively, and Amazon now charges sales tax in states that represent about two-thirds of the U.S. population. In terms of shipping, Amazon says more than 20 million households belong to its Amazon Prime program that offers free 2-day shipping for $99 per year, which means millions of shoppers don’t pay for shipping when they buy at Amazon.com.

More specifically, the Wells Fargo and 360pi report also finds:

• In electronics, a category in which Amazon competes with Best Buy, RadioShack, Target and Wal-Mart, both Target and Wal-Mart have become “more competitive” with Amazon’s prices. In the most recent period analyzed—June through August 2014—Wal-Mart’s prices on electronics were 3.3% lower than Amazon’s. Target’s prices were 8.7% lower. Best Buy remains about 1% higher than Amazon while RadioShack has become “less competitive,” with its prices in the most recent period 20% higher.

• For clothes and shoes—here, it’s Amazon versus Kohl’s, Macy’s, Sears, Target and Wal-Mart—Target’s prices on average during the six months are 6% lower than Amazon’s. Wal-Mart’s prices were 6% to 8% lower, the report states. That said, Amazon has become more competitive recently, which the report says is because of back-to-school promotions. Kohl’s, meanwhile, has apparel and shoe prices at least 23% higher than Amazon’s during the past year, while Sears—which about a year ago has prices 2.5% lower than Amazon’s—charged 15.7% more, on average, for clothes and shoes than did Amazon in June through August.

• In the health and cosmetics category—where the reigning e-commerce queen takes on Kohl’s, Macy’s, Sears, Target and Wal-Mart—the department stores charge higher prices than does Amazon. For instance, Macy’s prices from June through August were about 50% higher, while Kohl’s prices were about 24% higher. That Kohl’s figure represents a decline from earlier periods over the last year, a trend the report credits to the chain improving focus on the product category and trying to become more competitive. Again, Target and Wal-Mart come out as the most aggressive on pricing, with Target’s prices about 2% lower than Amazon’s, and Wal-Mart’s about 11% lower during the most recent reporting period. In fact, Wal-Mart’s price advantage in this category continues to drop, from 2.9% lower about a year ago.

• In housewares—here, Home Depot, Lowe’s, Sears, Target and Wal-Mart try to dislodge Amazon—the general trend, the report says, “is that retailers are getting more competitive with Amazon,” with the exception of Lowe’s. Target and Wal-Mart once again are striving for their gold stars, with their prices 5% to 10% lower than Amazon, and that gap has grown “meaningfully larger” over the last six months. Lowe’s, meanwhile, managed to keep pace with Amazon on prices during the first six months of the report tracking period but has since gone 8% higher on average on like-for-like items.

For much more information about online pricing and the technology retailers use to monitor and tweak what they charge for products, be sure to check out this free article from the August issue of Internet Retailer magazine.

Internet Retailer has reached out to retailers mentioned in this report but has not received immediate comment.

 

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