Wal-Mart, Amazon Battle For Online Retail's Future 272
Hugh Pickens writes "The NY Times reports that Amazon and Wal-Mart are waging a price war for the future of online retailing that is spreading through product areas like books, movies, toys, and electronics. The tussle began last month over which company had the lowest prices on the most anticipated new books and DVDs this fall, but has now spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven. '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.' Wal-Mart, with $405 billion in sales last year, dominates by offering affordable prices to Middle America in its 4,000 stores, while Amazon, with $20 billion in sales, caters mostly to affluent urbanites who would rather not push around a cart. But Amazon is expanding its slice of the retail pie at an alarming rate — its sales shot up 28 percent in the third quarter of this year; and sales in Amazon's electronics and general merchandise business are up 44 percent. 'We have to put our foot down and refuse to let them grow more powerful,' says Dias. 'I applaud Wal-Mart. It's about time multichannel retailers stood up and refused to let their business go away.'"
Re:Sales Tax (Score:3, Interesting)
purveyors of crap (Score:5, Interesting)
Wal-Mart has been the purveyor of crap for many years now. They push companies close to bankruptcy by insisting that the suppliers' margins be pennies per unit - or they push companies to produce cheaper, crappy Wal-Mart versions of their product with a decent profit margin, but agreeing to do it Wal-Mart's way can ruin your company by tarnishing your reputation. When Joe Sixpack buys your Wal-Mart model TV, your Wal-Mart model computer, or your Wal-Mart lawn mower and the thing turns out to be a piece of crap. Your company's name will be tarnished, and you will get the blame, not Wal-Mart. You might make millions in the short term but over the long term, think about shutting down your company and starting a new one,
Check out the Snapper story (the man who said no to walmart)
http://www.fastcompany.com/magazine/102/open_snapper.html [fastcompany.com]
I shop at Wal-Mart for some things. I don't buy most appliances there though. I buy underwear, DVDs, and personal care items. Electronics, appliances I want to last for more than six months, and other bigger-ticket items I will buy elsewhere.
Re:Wait, WTF? (Score:3, Interesting)
If you need to take everything into account then Amazon helps the computer vendors, the ISPs and the shipping companies too.
Amazon Prime (Score:5, Interesting)
Walmart vs. Amazon (Score:4, Interesting)
Amazon does not really have to compete on price. While at worst people might be agnostic towards Amazon, they hate Walmart.
Very few people are going to dump Amazon merely because the Evil Empire's a little cheaper. Buying is more than merely getting a product. The actual buying is but a small part of a larger service.
It's similar to Newegg. Newegg does not always have the lowest prices. But I know they ship the same day so I'll get it quickly and they'll fix any problems if something goes wrong. So if it's tech related, I almost always buy from Newegg. For nearly everything else, I use Amazon.
Re:Stereotypes much? (Score:3, Interesting)
Wal-Mart ... dominates by offering affordable prices to Middle America... while Amazon ... caters mostly to affluent urbanites
Because we all know how there are no Wal-Marts along the East or West Coasts, and those backward "middle Americans" don't have the Internet.
The words you yourself are quoting literally say "dominates by" and "mostly". Why is it that you can't make perfectly accurate demographic statements without somebody feeling the need to refute claims about "all" and "no" which have never been made? It is a good thing not to attribute a demographic average to every member of the group, but rejecting the average trend itself is just silly, and not insightful at all.
A one minute search on google revealed this paper that shows negative income elasticity for Wal-Mart shoppers. I would be shocked if further search would not give more statistical support to the orginal claim.
http://economics.missouri.edu/working-papers/2008/WP0805_basker.pdf [missouri.edu]
Re: Products (Score:4, Interesting)
Re:Stereotypes much? (Score:3, Interesting)
Well, to be fair, the real reason I avoid Wal-Mart (yet strangely continue going to Target and a host of other stores) is that I dislike pushing shopping carts. It also can't possibly have anything to do with having a wider selection online, including higher quality and more durable products.
Dear original post author: if I want clueless stereotypes I know where to find Thomas Friedman.
Re:Amazon Prime (Score:4, Interesting)
Brick-and-mortar stores have an advantage. (Score:2, Interesting)
Namely, products at Walmart can be sold through 2 channels: online visitors and in-store visitors. If a product cannot be sold online, then the product can remain on the shelf for an in-store visitor to buy.
If a product offered by Amazon cannot be sold online, the product sits in the warehouse. The product in the warehouse is a continuing drain on Amazon's finances since Amazon must pay the cost of maintaining the warehouse.
Amazon has been competitive against smaller retailers like Mervyns (which never survived bankruptcy) because the warehouses of Amazon are huge and offer much variety. If you cannot find a pair of pants with the right size, you can likely find the right size at Amazon.
However, this advantage is ineffective against Walmart. It is the largest retailer in the world. The variety that Walmart offers rivals Amazon.
Walmart will crush Amazon. The bell tolls for Amazon.
Re:Amazon has one advantage (Score:4, Interesting)
from your post, I am guessing you have heard about The Man Who Said No to Wal-Mart [fastcompany.com] But it is good to read the whole thing, it is not a one sided, "walmart pushes them to produce lower quality", the end. It is just as often a push to produce at a economical quality level. IE its usually better to buy a lawn mower that lasts half as long, but costs 1/3 as much. In that case it also pushed down the price of the quality products, by forcing them to be more efficient as well.
Re: Products (Score:1, Interesting)
We in Canada also tend to pay higher prices for many goods, even though our dollar is nearly at par with the US dollar. Case in point, a pair of Levis jeans at JC Penney costs $33 US [jcpenney.com] (even less if you find a JC Penney coupon online). The same jeans at Sears Canada cost $85 CDN [sears.ca]. And JC Penney is forbidden to ship Levis to Canada (I know, I phoned them and asked).
Re:Stereotypes much? (Score:1, Interesting)
Actually, when Sam Walton started walmart, they wouldn't put a new store in any town with a population greater than 10,000. Their entire business worked in small towns until the 80s. The plan is simple. You move into a small town where you can undercut all the mom/pop stores, put them out of business and then nearly everyone HAS to shop at your store. Moving into a big city when you're just starting your business doesn't make as much sense because you're competing with other stores with similar offerings. That's why it was so successful. It started in Bentonville, AR and spread across all the small towns in the area first.
Re:Amazon has one advantage (Score:3, Interesting)
So-called? As Jim Hightower points out,
Re:Amazon has one advantage (Score:2, Interesting)
Exactly. It's just like those stupid mattress commercials... "We'll beat anyone's advertised price or your mattress is FREEEEE!!!!"
This is a double lie, and they know it. First, if anyone showed them a lower advertised price, they'd simply sell the mattress to you for a penny less or something. They're not gonna say, "Well, we won't sell it to you for that low, so we're going to have to give it to you for free instead." Duh.
Second, the mattress industry is in cahoots with the retailers, providing different model numbers for every single retailer. So there will never be a lower advertised price on a mattress that particular store sells. Furthermore, this makes it impossible to directly compare different mattresses from different stores when shopping. While I'm not fond of too much government regulation in free markets, I do think it would be beneficial to have better rules to bust up this kind of anti-consumer BS.
Imagine if every consumer product industry did this. It'd be a nightmare.
Re:Amazon Prime (Score:3, Interesting)
don't forget Amazon Prime. $80/yr for free 2-day shipping? That's a guaranteed money-loser for them..
I would bet that Amazon Prime is one of their biggest profit centers. With proper supply chain management, an Amazon Warehouse is ALWAYS close enough to you for normal ground shipping to only take 2 days. So essentially they are shipping it the cheapest ways possible for probably 90% of their prime shipments, yet they get people to pay "extra" for it. They already have free shipping above $25, which means that they are padding their prices to absorb the shipping costs. The only value Amazon prime is would be on low stock item at distance warehouses, even then the argument that they get amazing discounts from UPS makes the extra cost fairly negligible.