Tags: Wal-Mart | Amazon | Prices | DVDs

Attention, Shoppers: Wal-Mart Beats Amazon Prices, Including DVDs

Friday, 22 June 2012 11:49 AM

In an era of serial comparison shopping, Amazon.com Inc. has seemed unassailable. Yet for many kinds of merchandise — the first-season DVDs of “Glee,” say — shoppers can get a better deal at Wal-Mart Stores Inc., both online or at a superstore.

A study conducted by Kantar Retail, a London-based research firm, compared prices on a wide range of 36 items and found that on average they’re 20 percent more expensive at Amazon than at Wal-Mart. The “Glee” DVDs? At $38.99, they were about $14 pricier at Amazon than Wal-Mart when the study was conducted in April. On goods such as food, Amazon’s prices were almost 60 percent more, though some items are cheaper, the study said.

Consumers “trust Amazon will have a low price,” said Anne Zybowski, a Kantar analyst who co-wrote the study. “On many items, they do have competitive prices. That’s how Amazon has won millions of customers one shopper at a time.”

Still, when it comes to controlling prices, Amazon is playing catch-up with Wal-Mart, which has been building its supply base, wringing costs from its vendors and amassing buying power for 50 years. Amazon is working on bringing in new vendors and lowering costs in its supply chain, Zybowski said.

Last year, the Seattle-based company’s sales grew 41 percent to $48.1 billion. Bentonville, Arkansas-based Wal-Mart, the world’s largest retailer, increased U.S. sales at its namesake stores 1.5 percent to $264.2 billion. Wal-Mart shares have climbed 27 percent in the last 12 months, compared with a 14 percent gain for Amazon.

Price Advantage

Sally Fouts, an Amazon spokeswoman, didn’t respond to several requests for comment.

Wal-Mart has never tried to advertise its price advantage against Amazon or other dot-com players, David Tovar, a spokesman, said in an interview. The retailer has advertised its price advantage on certain goods against local retailers in select U.S. metro areas, he said.

“We’ll leave it to Kantar to talk about prices,” he said.

Kantar did the study for the first time after watching Wal- Mart’s core shoppers moving to the Web at a faster clip, said Robin Sherk, who co-authored the study. Five years ago, only about a quarter of Wal-Mart’s customers shopped at Amazon, according to another Kantar survey. Now half say they do.

Kantar pulled together a basket of 36 goods across four categories -- including edible grocery, non-edible grocery, health and beauty aids and general merchandise. They looked at Walmart.com and visited a Supercenter in a New Hampshire suburb that Kantar declined to identify, chosen because it’s not in the middle of nowhere and it’s not in a city and therefore was deemed representative of a typical Wal-Mart store.

Special Deals

The prices don’t include shipping because both companies offer a variety of options that can significantly vary in cost. Amazon will adjust prices if it discovers Wal-Mart or Target Corp. are running special deals.

Many consumers are drawn to Amazon’s convenience, free shipping and customer service. One frequent customer is David Washburn, who rarely compares the online retailer’s prices with Wal-Mart or other stores.

“I’m not going to shop around just to save a dollar or two,” said Washburn, 41, who works for a logistics company in Atlanta. “You don’t have to leave your home. Wal-Mart has too much of a warehouse flavor.”

Of course, Wal-Mart has its own online store, where prices on average are 7 percent cheaper than Amazon’s, according to Kantar. Yet Walmart.com generates less than 2 percent of the company’s U.S. sales.

Steal Buyers

By selling items on special, Wal-Mart is trying to steal back buyers in core Amazon categories such as entertainment. That’s where its “Glee” DVDs come in.

Meanwhile, Amazon is offering an increasingly broad range of merchandise. For that, it relies on third-party suppliers to sell items at its Amazon Marketplace, which pushes up the prices, Kantar says.

In some cases, those third-party suppliers bought items like the “Glee” DVDs on sale at a big-box retailer, waited until the sale ended and then sold it on Amazon at a profit, according to Zybowski. This tactic, called “front-door diversion,” drives up the prices on Amazon.

There is one mitigating factor, according to Sherk. Amazon shoppers who join its Subscribe and Save program and buy goods in bulk can get close to Wal-Mart’s prices. For example, a $6 jar of Skippy peanut butter falls to $2.78 a jar if the member buys a six-pack of them. That’s just a penny more than Wal-Mart charges for a single jar, the study said.

Built Trust

Consumers will still buy from Amazon because the company has built up trust, especially in its core categories such as books, electronics and music. Amazon wins on some items, including LMFAO’s new CD, which at $9.16 undercut Wal-Mart by 84 cents.

In general merchandise, which includes movies and entertainment, Amazon had lower prices than the Wal-Mart Supercenter and Walmart.com on three of 10 items that Kantar compared. The 10 items cost $176.76 on Amazon, which was $25.68 more than Wal-Mart’s Supercenter and $31.02 more than Walmart.com was charging at the time.

Wal-Mart has a bigger advantage when it comes to food, where Amazon has started competing more recently. For example, a box of Bisquick pancake mix cost $14.52 on Amazon and $6.12 at a Wal-Mart Supercenter, the study said.

Grocery continues to be a stronghold for Wal-Mart, especially at its stores. Amazon still is working on building up its assortment and developing its supply chain to drive down costs, Zybowski said.

Keeping Customers

As Amazon improves in those categories, Wal-Mart and Target will have a tougher time keeping customers, Zybowski said. Amazon had all of its items in stock at the time of the study. At Wal-Mart, 3 percent of its items were out of stock at the Supercenter and 14 percent of the items that were compared were out of stock at Walmart.com.

As shoppers head online, Amazon also has a brand advantage, she said.

“The challenge Wal-Mart has is, when you ask shoppers which physical store they go to for low prices, it’s Wal-Mart,” she said. “When you ask about online, it’s Amazon.”

© Copyright 2018 Bloomberg News. All rights reserved.

1Like our page
Friday, 22 June 2012 11:49 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved