Wal-Mart, Target and Amazon; why doesn’t Wal-Mart have a bigger price advantage?

Richardglobalheader (4)
Retailing Today
has an excellent article on the pricing battle between Wal-Mart, Target and Amazon.  The article, entitled “Price leadership not so steady” states that the pricing gap between Wal-Mart and the retailers it worries about most, Target and Amazon, is shrinking.

The study cited is by Citigroup and here is how the Retailing Today article describes the results:

According to Ciitgroup, retail prices of a basket of “hot” toys for holiday 2011 are now 30 bps cheaper at Walmart than at Target, compared with 50 bps cheaper at Walmart in its previous survey… While Target may be the competitor Walmart pays most attention to, Amazon continues to pose a threat, with its toy prices falling 6% during the same two-week period since Citigroup’s previous survey. Amazon’s basket of toys is now 650 bps pricier than Walmart, compared with 920 bps pricier for the prior survey.

Wal-Mart has historically differentiated itself from its competition by being the uncontested low price leader.  That as opposed to Target which provides higher quality goods or Amazon which

offers stay at home convenience.  It is therefore surprising, to say the least, that Amazon and Target are as close as they are to Wal-Mart in pricing.

Being the low price leader by a little may not be good enough in an economy that is changing rapidly.  Wal-Mart needs to figure out how to do a better job of doing what they do best, having the lowest prices by a mile,  or they may find themselves having to make some changes they may not want to make. 

2 thoughts

  1. Walmart has no price advantage!
    They sell inferior products and brands are higher priced than competitors
    There not to educated customers are beginning to get it.
    Worst service, employee relations, etc.

  2. Hi Richard:
    This is very interesting and amplifies the reasons for concerns in Bentonville. Walmart cannot keep pushing down prices on existing products — the Chinese factories complain more about Walmart’s pricing power than any other factor impacting their business. They are now resisting. In some cases saying: “No Thank you”. What is Walmart to do? Fund an aggressive lobbying effort to repeal the internet sales tax exemption. The price differences you cite are not enough to offset the avoidance of sales tax and free shipping!
    Thanks for listening.

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