Tuesday, November 24, 2009

Price War Brews Between Amazon and Wal-Mart; Cutthroat Competition is a Consumer's Best Friend

Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com. In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.

The tussle began last month as a relatively trivial but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this fall. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven, a 45-year-old toy from Hasbro that usually heats up small cakes, not tensions between billion-dollar corporations.

Last Wednesday, Wal-Mart dropped the price of the oven to $17, from $28, as part of its "Black Friday" deals. Later the same day, Amazon cut its price, which had also been $28, to $18. "It’s not about the prices of books and movies anymore. There is a bigger battle being fought," said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. "The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon."

9 Comments:

At 11/24/2009 9:18 PM, Anonymous Anonymous said...

I demand a public option for an easy bake oven. Only then will prices come down further.

 
At 11/24/2009 11:19 PM, Anonymous Steve said...

Sometimes things go to far and the suppliers lash back. The film production industry is currently limiting access to new releases to companies like Redbox that have cut prices beyond what is profitable for everyone.

 
At 11/24/2009 11:55 PM, Blogger OA said...

How does the easy bake oven work with CFL lights?

 
At 11/25/2009 2:40 AM, Blogger Chuck said...

lET'S FIGURE OUT WHICH ONE WILL WIN THE PRICING BATTLE WHILE THROWING A BONE TO A FEW CONSUMERS?

WALMART NET INCOME $13,400,000.00
AMAZON NET INCOME $645,000.00

THAT WAS EASY

 
At 11/25/2009 8:19 AM, Blogger Colin said...

I look forward to the day we have price wars in health care.

 
At 11/25/2009 8:23 AM, Blogger Mark J. Perry said...

Colin: We'll know when health care is sufficiently competitive when we see ads for house calls.

 
At 11/25/2009 8:31 AM, Blogger MovingEast said...

re: Chuck -

Look at Amazon's margins vs Walmart's margins. All those stores mean Walmart has a much lower % of revenue that it can afford to cut...

I would expect Amazon to come top of this one.

On a related note, it is interesting that Amazon & Walmart have been trading Operations people (Walmart was mighty annoyed a year or so ago when a number got head hunted by Amazon) - efficiency in operations is what seems to drive both companies.

 
At 11/25/2009 9:30 AM, Anonymous lyle said...

To contrast the posting favoring amazon. A lot of the online offerings are online only, the stores have different. Wal-Mart has with its ship to store program an almost free way of shipping, since the goods are at the regional distribution centers and the trucks have to go to the stores anyway.
Note that the outcome of the out of state sales tax may well be a big factor. Currently anything bought on Wal-Mart online is charged sales tax in all states since Wal-Mart has a nexus in every state. For Amazon this is not the case.

 
At 11/25/2009 11:16 AM, Blogger Walt G. said...

lyle,

If you don't pay Amazon the sales tax, you legally have to pay it to the state yourself: You mean you don't? :) Maybe that is the public option?

 

Post a Comment

Links to this post:

Create a Link

<< Home