Can retail rivals beat Amazon without having lower prices over the holidays?

Discussion
Photo: Amazon
Nov 09, 2018
George Anderson

A new research study is supporting the conclusions of others that have preceded it. When it comes to the lowest prices online, Amazon.com is the winner more often than not.

The new study from Profitero, which compared prices on 100,000 products from 16 retailers from April through June this year, found that Amazon had the lowest prices on 11 of 15 product categories.

Amazon’s prices, on average, were 13 percent lower than its rivals overall in the categories studied.  Walmart.com’s prices were 2.3 percent higher, Jet.com’s were 4.2 percent higher and Target.com charged nearly 12 percent more than what Amazon charged.

There were instances, however, when Amazon didn’t have the lowest price. Chewy.com’s prices for pet supplies were 2.3 percent cheaper than Amazon’s. Jet.com had lower prices in beauty (.4 percent) and music/CDs (2.6 percent). Walmart was priced slightly lower on home furniture (.7 percent) and baby categories (.3 percent) than its rival.

Amazon’s price advantage was most stark in comparison to specialty retailers. In a head-to-head with Best Buy, Amazon was 13.3 percent less expensive on appliances and 15.2 percent cheaper on consumer electronics. It was also substantially cheaper on sporting goods (18.4 percent) than Dick’s Sporting Goods and nearly 25 percent cheaper on furniture than Wayfair.

According to research from Valassis, Amazon used special Prime Day pricing in July to grab early purchases for the Christmas season. Forty percent of U.S. consumers completed at least some of their Christmas shopping during Prime Day. 

The e-tail giant recently announced that it would offer free shipping on all orders, even without an Amazon Prime subscription, to provide a price plus convenience incentive for shoppers during the holiday season.

DISCUSSION QUESTIONS: Are low prices more or less important in the consumer decision making tree during the holidays when compared to other parts of the year? Do rivals such as Best Buy, Dick’s Sporting Goods, Target, Walmart, et al have to be seen by consumers as having lower and/or equivalent prices to compete during the holiday season with Amazon?

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"Retailers either need to compete with the promotions, selection and convenience of Amazon or find a way to differentiate their product selection or shopping experience."

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13 Comments on "Can retail rivals beat Amazon without having lower prices over the holidays?"


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Art Suriano
BrainTrust

It’s not just price but the overall experience. There are those consumers who only shop online for the holidays and those who actually enjoy going to stores because they get into the holiday spirit, love seeing items before buying them and like the holiday decorations. For the shopper who is only interested in price, Amazon will win most of the time. However the shopper who is doing it the old-fashioned way, going to stores, is interested in finding the “right” item. When matched with a friendly and knowledgeable associate that helps make the decision, Amazon doesn’t have a chance against this. Today there are more choices than ever of where to shop as well as how to shop. Price is important, but so is “wowing” the customer. Make them feel special and appreciated and they’ll buy from you every time.

Jeff Sward
Guest

Yes, absolutely rivals can beat Amazon. I don’t think price is always the first and final filter. Often I think it’s about “knowns” and “unknowns.” For knowns, which I will define as products that are “needed” and are repeat or replenishment products where the customer needs no additional homework, price and convenience will win the day — Amazon. For unknowns, the customer may do a lot of homework on both the internet and in brick-and-mortar, but if they really want to “experience” the product — touch, feel, smell, does it fit? — then the brick-and-mortar retailer has the advantage. Brick-and-mortar retailers that can engage the senses of the customer will earn the loyalty and repeat business of the BUYER, and maybe attract more SHOPPERS.

Lee Peterson
BrainTrust
I think if there’s a scale of attributes of importance to the American consumer, say one to 10, 10 being highest, price would be 10 through six and the next thing that would show up would be rated about a five. The American consumer has been raised on price and is trained to look for it in the most obsessive fashion possible. We are price crazy. Witness Black Friday pandemonium just for starters. Travel the world and tell me what other customer is as nutty about price as those in the U.S. It’s not even close. And this is not going to change as digital natives are worse than previous generations and better at finding the lowest price. The beat will go on. Amazon figured that out first and foremost, then became incredibly convenient (thanks to an understanding of the net and a fail fast strategy) and voila, a close to unbeatable combination, which is really showing up now and will again this holiday. Quality shows up sometimes above a five, but that’s a 1… Read more »
Rich Kizer
BrainTrust

Amazon is like that store next door that drops price to get footsteps/market share. There will always be customers looking for and patronizing those stores. For them, it’s all about price. So Amazon will sell a ton this year. Remember this: It’s always been a retail axiom that if you continue to chase the competition, the competition is essentially running your business. Rivals to Amazon will try to play in the game, but I certainly believe the best retailers will also have a wide eye on maintained margins, intelligent staff, outstanding service and in-store events. It will come down for retailers such as Best Buy, Dick’s Sporting Goods, Target and Walmart to shine in areas where Amazon cannot.

Liz Adamson
BrainTrust

It is not just low prices consumers are looking for but a combination of selection, convenience and price. All things that Amazon is known for. Especially during the holiday when consumers are more pressed for time and have a large amount of purchasing to do. To stay in the game retailers either need to compete with the promotions, selection and convenience of Amazon or find a way to differentiate their product selection or shopping experience.

David Naumann
BrainTrust

On many items it will be difficult to compete with Amazon, even with lower prices. Since most consumers (more than 50 percent) start their product search on Amazon they will often purchase on Amazon, as they feel confident they are getting a fair, and probably the lowest, price.

However there are some product consumers are willing to pay a little more for because of the convenience of having a physical store nearby. For example, I would prefer to buy a TV from Costco or Best Buy, just in case there is a problem. It is much easier to return the bulky product to the local store than ship it to Amazon. Another holiday gift that is nice to buy from a local store is apparel. If I don’t know if the recipient is going to like the style or color of the sweater by them, it is more convenient and fun for them to go to the local store to exchange the item for something they like better.

Ryan Mathews
BrainTrust

I think prices become important in a different way during the holidays. First, since retailers seem to have doubled down on an item and price approach, it’s hard for a consumer not to focus on them — before and after a purchase. This after-purchase focus creates the retail equivalent of the automobile industry’s “buyer’s regret” — which routinely sees customers reading car ads more frequently after they buy or lease a vehicle to see if they had gotten a better deal. Also, measurements are different at holiday time. If a consumer has set a budget, then prices of individual items begin to be seen in light of that larger purchase commitment, rather than on a single item/value basis. All of that said, I don’t believe that price is necessarily the most critical factor when it comes to purchase decision — especially at emotional times of the year.

Richard J. George, Ph.D.
BrainTrust

While low prices may be the ante, particularly during the holidays when consumers are looking to stretch their budgets, it is not the only differentiating variable. Amazon still continues to dominate online and brick-and-mortar retailers in terms of the shopping experience. Amazon’s customer intimacy, ease of shopping, shipping alternatives, return policy, etc. still represent the “North Star” that other competitors are seeking to emulate.

The noted rivals need to match Amazon’s service and perhaps offer lower prices to entice customers to switch. Amazon’s first mover advantage in so many areas makes it harder for others to take share. The holidays will be no exception.

gordon arnold
Guest

As we move into the holiday season price will take a back seat to availability and shipping costs as it always does. Placing high turn holiday gifts on the shelf instead of the e-commerce page could bring people and add-on sales to the stores. The key to beating the competition, any competition, is having what the consumer wants or needs now at an affordable price.

Michael Blackburn
Guest
1 month 9 days ago

I’m not sure how this study was conducted. Whenever I walk into an electronics store, chain or mom and pop, and take my phone out, the first thing the sales person says is “we will match Amazon.” So Amazon is great for price transparency, but I don’t believe it provides any meaningful price advantage over the competition.

Cynthia Holcomb
BrainTrust

Holiday shopping is different than the month-in and month-out shopping. Buying a gift or items for one’s self or one’s home takes on a sense of urgency. Price and ease of purchase and delivery are paramount. Amazon seems to have both covered based on its successes. The caveat with Amazon is third-party sellers, reading reviews on their lowest price offerings, trust they perform, and there’s no one at Amazon to answer the phone if the product does not arrive. The second caveat is that Amazon’s massive catalog requires lots of time to navigate through. Bottom line, a few dollars here and there are worth peace of mind and time saving to digitally shop retailers with well-organized catalogs, offering the same or similar competitive shipping times as Amazon.

James Tenser
BrainTrust

On items with service, returns or installation requirements, like TVs, large appliances or car audio, yes, rivals have opportunities to best Amazon. On items with a high likelihood of returns or exchanges, like apparel, yes, sometimes. On exclusive branded items, like some fashion boutiques, yes, often. On many commodity items however, like toys, Amazon will use pricing, availability and speed to command a growing share of holiday sales.

There’s no winning a race to the bottom on price versus the Big A, but it’s not the best way to purchase every item, and consumers are aware of this. Successful rivals will pick their spots, curate their assortments, and try to capture a share of early seasonal spending. Amazon will have an edge at the last minute when speed is the only thing that matters.

Mike Osorio
BrainTrust

The concept of “beating” Amazon is a bit nonsensical. Amazon will, in aggregate, continue to dominate holiday shopping on the strength of price, convenience and trust for most product categories. The question is how other retailers define “success”. If it is in stock valuations, which requires ever growing revenues and profits, then most will lose. However, if success could be defined by providing desired product with exceptional service that drives sufficient transactions to provide sustainable profits that allow for continued investment in the retailer’s talent, technology and physical plant, then a huge percentage of Amazon’s “competitors” can be seen as winning.

We need to get beyond the concept of winners and losers defined by a flawed institutional investor driven model and focus instead on financial models that allow low growth, yet profitable models to thrive.

I for one will continue to shop Amazon for a large percentage of my purchases and also do business with startups, small businesses and other unique specialty retailers when I want a more unique and complete experience.

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Braintrust
"Retailers either need to compete with the promotions, selection and convenience of Amazon or find a way to differentiate their product selection or shopping experience."

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