In a blunt message to retailers: “Don’t try to beat Amazon and Walmart at the price game. You don’t have the weapons,” e-commerce performance analytics platform Profitero said in its newly released study.
Why? Amazon can subsidize low prices with its other businesses, such as advertising, which grew 51% in the third quarter, according to Profitero. Meanwhile, the ubiquitous Walmart, with its more than 4,500 U.S. stores, has more than a few bargaining chips with which to secure competitive pricing from its vendors.
But as many Americans face pandemic-related economic uncertainty, the stakes for price competition heading into the 2020 holiday season are high, said Profitero, which points to recent McKinsey research that found 48% of consumers will choose a holiday retailer based on price and promotions this year.
Now in its fourth year, Profitero’s comprehensive Price Wars series compares item-level price competition across the U.S. online retail landscape. The study analyzes everyday prices on 18,400 best-selling items in 21 categories across 14 leading online retailers, including Amazon, Walmart.com, Target.com and specialists, such as Chewy, Wayfair and Best Buy.
In the study’s price comparisons, categories most relevant to grocers included food and beverage, pet, vitamins and supplements, health and personal care, and beauty. Only identical items available and in-stock in the same pack configuration were compared. Data was collected daily over eight weeks (Aug. 24 to Oct. 18), with daily prices averaged over the full period for comparison.
With Santa’s sleigh disguised as Amazon trucks, Mercedes-Benz Sprinter vans and U-Hauls this holiday season, Amazon is the e-commerce low-price leader, beating other major retailers on price by 15%, on average. The study found Amazon was the most competitively priced retailer in 18 out of 21 major consumer product categories, tying Walmart.com for the lowest online prices for beauty items and Chewy.com for pet items.
But don’t count Walmart out. “Amazon faces stiff competition from Walmart.com, which seconded Amazon in 15 of the 21 categories studied and was found to be only 4% more expensive than Amazon, on average.” The study further finds that Walmart is now matching prices with Amazon on beauty items, a notable change from last year, when Walmart was 8% more expensive than Amazon in the category.
And when it comes to online food and beverage prices, while Amazon is again the low-price leader, Walmart (2% more expensive) and Kroger (4% more expensive) are not far behind. According to Profitero’s research, among what it calls the “Big Three” U.S. retailers (Amazon, Walmart and Target), Target is the least competitively priced at 20% more expensive than Amazon on food and beverage items, a jump up from last year’s Price Wars study when Target was 12% more expensive than Amazon.
If the rest of the online retail world can’t compete on price this holiday season, what can they do to remain competitive? “Instead of competing on price, retailers will need muscle in different areas, namely: assortment (i.e., exclusive product lines); a reputation for great service; personalized shopping experiences; or expertise,” said Profitero, adding that a quality click-and-collect program offers another point of differentiation in COVID-19 world.