Amazon's Pricing Strategy Makes Life Miserable For
Post# of 23074
Posted On: 11/20/2014 8:21:10 AM
Amazon's Pricing Strategy Makes Life Miserable For The Competition
During the Christmas shopping season we will see Amazon change prices on as many as 80 million products during a single day. That is amazing since companies like Walmart, Best Buy and Toys “R” Us have already announced that they will not be undersold and will match any competitors’ prices in a printed flyer or website. That is going to create a competitive environment that will make shopping more challenging for savvy customers. Walmart’s store managers have been empowered to meet all competitor prices. Amazon will be challenged by major retailers for every sale.
Best Buy’s policy that it will meet all competitor prices reflects a strategy to avoid “show rooming” in their stores—where consumers touch and feel Best Buy’s very large selection of electronic hardware and appliances then buy online. By being aggressive in meeting the Internet competition, Best Buy is likely to convert many of these types of shoppers as customers. Toys “R” Us will also match prices in order to avoid giving up share to the Internet or to competitors like Walmart or Target stores. They can’t afford to lose sales to others during the most important selling season for toys.
Amazon intends to continue gaining market share in this very competitive environment Black Friday deals including smartphones, diamond rings and Wrangler jeans, are already visible on Amazon’s website. Anticipating a rush, and there will surely be one, Amazon is adding deals to their website every day. They are likely to be the leader in adjusting prices to the lowest level in order to motivate buying.
Internet Retailer Magazine reported in mid-2013 that Amazon changed prices on about 40 million products many times during a single day since they want to provide customers with the lowest prices and best value across their vast selection. As an example, the magazine cites an HP Project 8600 printer that for sale on April 30 at Sears Marketplace at about $160, while Amazon had it at $120, Office Depot at $130, B&H at $110, and Amazon Marketplace at $100. At 9 am at Sears Marketplace the price went up to $190, while B&H upped it to $120. Then Sears Marketplace dropped it to $155, but bounced back to $190 at 2pm. At the same time Amazon raised its price to $130. By 6 pm the lowest priced seller on Amazon Marketplace raised its price from $100 to $105. While Sears changed its price four times on this date, B&H and Office Depot kept their price constant.
I am told, that Amazon on many days changes their prices even more frequently. During the holiday season Amazon last year changed prices on as many as 80 million products. For example, during the Black Friday week last year, Amazon had 2,840 price changes just for several very competitive, relatively low margin, departments including electronics, toys and housewares while Walmart had 922 changes, Target 354, Best Buy 336, and Toys “R” Us only 64. The following week, which included Cyber-Monday Amazon jumped to 3,301 price changes in these categories, while Walmart had 977, Target 493, Best Buy 374 and Toys “R” Us 343. The following week, which included a snowstorm, Amazon lead with 3,474 price changes, Walmart had 850, Best Buy 485, Target 441 and Toys “R”Us 340.
In our example, not all price changes went down, some actually went up, enabling retailers to recover some profit margin by raising prices while remaining competitive. However, as the season progressed, the lack of sales momentum encouraged retailers to take more markdowns in order to capture as much business as they could and avoid losing market share given Amazon’s aggressive stance. It is a marvel how fast price reductions are taken on the Internet. Given the more aggressive stance of the traditional retailers, I have to wonder if there will be any profit margin in some of these highly competitive merchandise categories.
E commerce is big business today and growing at a rapid rate. Web sales in 2013 were $263.3 Billion. This was an increase of 16.9% over the previous year. I see a major increase again in 2014. I estimate a 15% increase, topping $300 Billion in sales. With each passing year, the online retailers put more and more pressure on the traditional retailers and that is not going to stop any time soon
During the Christmas shopping season we will see Amazon change prices on as many as 80 million products during a single day. That is amazing since companies like Walmart, Best Buy and Toys “R” Us have already announced that they will not be undersold and will match any competitors’ prices in a printed flyer or website. That is going to create a competitive environment that will make shopping more challenging for savvy customers. Walmart’s store managers have been empowered to meet all competitor prices. Amazon will be challenged by major retailers for every sale.
Best Buy’s policy that it will meet all competitor prices reflects a strategy to avoid “show rooming” in their stores—where consumers touch and feel Best Buy’s very large selection of electronic hardware and appliances then buy online. By being aggressive in meeting the Internet competition, Best Buy is likely to convert many of these types of shoppers as customers. Toys “R” Us will also match prices in order to avoid giving up share to the Internet or to competitors like Walmart or Target stores. They can’t afford to lose sales to others during the most important selling season for toys.
Amazon intends to continue gaining market share in this very competitive environment Black Friday deals including smartphones, diamond rings and Wrangler jeans, are already visible on Amazon’s website. Anticipating a rush, and there will surely be one, Amazon is adding deals to their website every day. They are likely to be the leader in adjusting prices to the lowest level in order to motivate buying.
Internet Retailer Magazine reported in mid-2013 that Amazon changed prices on about 40 million products many times during a single day since they want to provide customers with the lowest prices and best value across their vast selection. As an example, the magazine cites an HP Project 8600 printer that for sale on April 30 at Sears Marketplace at about $160, while Amazon had it at $120, Office Depot at $130, B&H at $110, and Amazon Marketplace at $100. At 9 am at Sears Marketplace the price went up to $190, while B&H upped it to $120. Then Sears Marketplace dropped it to $155, but bounced back to $190 at 2pm. At the same time Amazon raised its price to $130. By 6 pm the lowest priced seller on Amazon Marketplace raised its price from $100 to $105. While Sears changed its price four times on this date, B&H and Office Depot kept their price constant.
I am told, that Amazon on many days changes their prices even more frequently. During the holiday season Amazon last year changed prices on as many as 80 million products. For example, during the Black Friday week last year, Amazon had 2,840 price changes just for several very competitive, relatively low margin, departments including electronics, toys and housewares while Walmart had 922 changes, Target 354, Best Buy 336, and Toys “R” Us only 64. The following week, which included Cyber-Monday Amazon jumped to 3,301 price changes in these categories, while Walmart had 977, Target 493, Best Buy 374 and Toys “R” Us 343. The following week, which included a snowstorm, Amazon lead with 3,474 price changes, Walmart had 850, Best Buy 485, Target 441 and Toys “R”Us 340.
In our example, not all price changes went down, some actually went up, enabling retailers to recover some profit margin by raising prices while remaining competitive. However, as the season progressed, the lack of sales momentum encouraged retailers to take more markdowns in order to capture as much business as they could and avoid losing market share given Amazon’s aggressive stance. It is a marvel how fast price reductions are taken on the Internet. Given the more aggressive stance of the traditional retailers, I have to wonder if there will be any profit margin in some of these highly competitive merchandise categories.
E commerce is big business today and growing at a rapid rate. Web sales in 2013 were $263.3 Billion. This was an increase of 16.9% over the previous year. I see a major increase again in 2014. I estimate a 15% increase, topping $300 Billion in sales. With each passing year, the online retailers put more and more pressure on the traditional retailers and that is not going to stop any time soon
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NASDAQ DIP and RIP
Here is the best word that describes what i do here.
Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'
NASDAQ DIP and RIP
Here is the best word that describes what i do here.
Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'