The gap between Wal-Mart's product prices and Amazon has shrunk now, it's a key milestone that Wal-Mart will regain the title of "low price leader." Starting this year, Wal-Mart has been investing aggressively to meke its products price more competive than real store retailers. According to price surveys, the results of interviews with pricing experts, retail consultants, sellers and companies, it shows that the gap between Wal-Mart's commodity prices and its rival Amazon is now getting smaller.
As of November 7, 2017, within 700 days, Market Data, a retail data analytics company, conducted research on 11 categories and 213 product prices. The results show that product prices on Wal-Mart's e-commerce platform Walmart.com, on average, only 0.3% more expensive than Amazon now. In contrast, however, Wal-Mart's products cost on average 3% more expensive than Amazon in the former 350 days. In popular wearables category, including fitness trackers, smart watches and other products, Wal-Mart's price this year is 6.4% lower than the Amazon. In contrast, Wal-Mart's price last year is 12.4% higher than the Amazon. For sports and outdoor products, Wal-Mart is currently 1.3% below Amazon's and 3.5% above Amazon last year. These findings show that Wal-Mart is able to sustainably reduce the prices of its various commodity products, not just by short-term discounts.
Constantly reducing the price is the key factor for the e-commerce enterprises to promote a full-year sales increase. On the Cyber Monday, the seller's busiest times of the year, deals and temporary promotions will keep prices of two retail giants down. Wal-Mart spokesman Dan Toporek said: "We are always working to keep E-commerce product prices catching and surpassing other sites." For some products, Wal-Mart will now show two prices on its website to let consumers know When they place an order online they will be more affordable to pick up in the store, but he refuses to reveal the pricing strategy for more companies. Amazon spokeswoman Kate Scarpa said there has been no change in the way Amazon offers consumers a low-cost product. She said: "Amazon's product prices are very low, even lower than other retailers, we have been trying to ensure that." She also declined to comment on further pricing strategy of Amazon.
Wal-Mart still has a long way to go. Cutting product prices is only one of the many Wal-Mart strategies to promote the development of e-commerce business, other strategies include expanding the e-commerce product category, the acquisition of small e-commerce companies such as Jet.com, as well as providing free " Day of "service.
But last month, data from Burt Flickinger, the managing director of retail consulting firm Strategic Resources Group, found that the price gap between Wal-Mart and Amazon this year has been shrinking compared to last year. Some Wal-Mart products price last year is higher than the 5% -12% of Amazon. Flickinger said: "Recently, we began to see Wal-Mart narrowed the price difference between products of Amazon, consumers can no longer distinguish the difference between them." Analysts said Wal-Mart invested over 1 billion US dollars last year, so that their own Product prices have more advantages and do not hesitate to sacrifice profits to achieve this.
At present, this strategy is effective. In the most recent quarter, Wal-Mart e-commerce sales rose 50% from a year earlier, the strongest quarterly revenue surge for the U.S. in the past 10 years.
According to eMarketer's data, as of October 2017 year, Wal-Mart's electricity sales accounted for 3.6% of total U.S. electricity sales, 2.8% up from last year. Even with such a big achievement, Wal-Mart still has a long way to go. Because Amazon has a share of 43.5% in the U.S. electricity market. And according to Cowen and Co estimates, nearly half of American households subscribe to Prime members who typically shop directly at Amazon and are less likely to make parity purchases.
Wal-Mart also competed with other physical retailers on e-commerce, such as Target and WayFair, which are targeting consumers who are comparing price on search engines such as Google. Analysts said Wal-Mart may gain more market share by cutting prices. Keith Anderson, senior vice president at E-commerce strategy and data analytics firm Profitero, said: "Wal-Mart's goal may not be to disrupt Amazon but to convince loyal store consumers that it is also a low-cost leader in e-commerce offerings."
Analysts and consultants expect that Wal-Mart will drop almost $ 6 billion in revenue over the next few years in order to keep e-commerce product prices at par with Amazon and keep gaining access to the rest of the retail market. But these investments have begun to erode Wal-Mart's profitability.
As of October 31, in the three months, Wal-Mart's operating profit has dropped to 2.8% for 4 months. But Wal-Mart still has $ 6.9 billion in cash reserves to invest in e-commerce product pricing strategy. Investors are currently not worried about Wal-Mart's cut in e-commerce product prices will have an impact on its announced 20 billion share repurchase program. Wal-Mart shares rose 1.5% after Wal-Mart announced strong sales results on November 16. In addition, Wal-Mart said last year and in October this year that it may slow down the opening of new physical stores and spend money on more and more e-commerce businesses. Charles Sizemore, chief investment officer of Sizemore Capital Management, which owns part of Wal-Mart, said: "Now the better way to spend money is to compete with Amazon and invest in e-commerce, because only Wal-Mart can be beat if someone has a chance to beat Amazon "
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