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Jun 19
2017

The Price War between Walmart and Amazon

Posted by: Steve Marr

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Recode recently ran an article about how Walmart was engaging in aggressive tactics to more effectively compete with Amazon prices both in the store and on Internet. (http://bit.ly/2nA1Fhh  ).While price is not always the only way to get customers, low prices are effective. When you go to buy gasoline and see three gas stations posting prices, and one is three cents lower; which location snags most of the cars.

 

Price wars may be challenging for companies, but they are always a good thing for customers. When I was in the international trade business, at times a competitor would target a segment of our customers and offer lower pricing. Generally this forced us to reduce our price to existing customers as a way to keep customers.  The low pricing cut into profit margins, but customers were undoubtedly delighted with lower cost.

I read a consumer analysis comparing Walmart and Amazon pricing. Over all, pricing was close until you figured in shipping which frequently tipped the scales to Amazon. Since I am on Amazon Prime and get free shipping on most purchases, I’m not too concerned about shipping.  With this competition I’m going to be more careful to check Walmart pricing before I buy on Amazon.  I’ve already learned that Amazon doesn’t always have lowest price.

A lesson for our businesses is look for opportunities where we can cut pricing and gain market share. When I was much younger and cut grass to earn money, I had to offer a lower price than the local landscape company. If my price was the same, my neighbor would simply hire the landscaper instead of me.  At the same time we need to be careful to respond to lower pricing from competitors. If we choose not to reduce our prices, we need to make certain that service quality is worth more than the money a customer would save with a competitor.

The Lord asked the question, "Can the prey be taken from the mighty man . . .” (Isaiah 49:24, NASB). In our business we need to fit the description of the "mighty man" if we are going to survive aggressive price competition. While price competition between Amazon and Walmart is great for customers, retailers will need to adjust.

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