Wal-Mart catching up to Amazon on price

Posted: November 5, 2017 at 1:13 a.m.

Amazon.com remains retail's leader when it comes to offering customers the lowest prices online, according to a recent study by e-commerce analytics firm Profitero.

Wal-Mart Stores Inc. isn't far behind and the Bentonville retailer's ability to close the gap the past few years shows it is "on the offensive" as it competes with the online giant.

The study, Price Wars: A Study of Online Price Competitiveness, was conducted over a three-month period in June, July and August. Profitero compared prices on 52,000 nonfood products across 13 categories at Amazon.com, Walmart.com, Jet.com, Target.com and other retailers. Only in-stock and identical products from brands were used for the study.

While Amazon continues to lead the way, Profitero senior vice president of strategy and insights Keith Anderson said it was clear Wal-Mart has become more competitive online.

The company's prices were, on average, 2.9 percent higher than Amazon. Wal-Mart's prices on similar products were 9 percent higher the last time the study was conducted in 2014.

"I think Wal-Mart clearly remains committed to price competitiveness if not price leadership," Anderson said. "They've certainly gotten more aggressive at an item level than they were the last time we did a major study like this. But I think they've also gotten more sophisticated at leveraging their different assets, relationships with suppliers, store base, their growing portfolio of sites, including Walmart.com and Jet.com."

The everyday low-price model was one of the key strategies of Wal-Mart's growth under founder Sam Walton. But Chief Executive Officer Doug McMillon said in June 2016 the company had become "too stagnant" in recent years when it came to pricing and "weren't playing offense with it."

Wal-Mart made it a priority after revealing plans to invest billions into lowering prices in 2015. The company began to move forward with the initiative in 2016.

Wal-Mart's U.S. Chief Executive Officer Greg Foran told investors last month that while everything else in retail is changing, the company's commitment to "delivering value" to customers in stores and online remains.

"As we said back in 2015, we are investing several billion dollars in price," Foran told investors. "We're pleased with how it's progressing and we will maintain that approach."

The 13 categories of products Profitero analyzed over the three-month period included beauty, vitamins and supplements, video games, toys and games, tools and home improvement, sports and outdoors, baby and electronics. Amazon had the lowest prices in 12 of the 13 categories. Food items were not included.

Wal-Mart offered lower prices online for beauty items (1 percent lower than Amazon) and was close in sports and outdoors (1 percent higher) and baby products (0.4 percent).

By comparison, Jet.com's prices across the 13 categories were 12.3 percent higher and Target 16.9 percent higher than Amazon.

Anderson said the data is helpful, but doesn't tell the whole story because retailers have introduced other ways to offer value that aren't limited to single items. For instance, it doesn't take into account discounts applied by Wal-Mart through its pickup discount program, which offers lower prices if customers are willing to buy items online and pick them up at a store.

The study also doesn't consider Jet.com's smart cart, which lowers prices in real time as customers add items to their basket. Other discounts are available for waiving the right to return items and using debit cards.

Amazon has created value for customers through Prime memberships and Target has its Red Card program as well.

"Through the lens of this study was Wal-Mart the winner of item-level prices?" Anderson said. "No, but they were close and they did win beauty. But I think the more holistic view of how Wal-Mart is navigating the really complex evolution of what price and value means for Wal-Mart the corporate entity in an omnichannel world is pretty interesting."

Wall Street has been impressed with those efforts. Since Wal-Mart provided an update on its business -- which included projected U.S. e-commerce sales growth of 40 percent next year, fewer new store openings and the continued rollout of online grocery pickup locations -- shares of company stock have climbed. Wal-Mart shares reached a 52-week high of $89.17 on Thursday.

"I think they're really well positioned to be a winner," Ben Bienvenu, a retail analyst with Little Rock-based Stephens Inc., said last month. "I think they're in a unique spot with the asset base they have and the leadership they have to be able to win. I think there's a lot of threats out there beyond just Amazon. But I think they're focused on the plan that they've laid out that's not only going to position them to survive, but to thrive."

Wal-Mart believes it is well positioned for the immediate future as well. The Christmas shopping season is underway after the retailer and Amazon.com unveiled some of the strategies for the important period.

Wal-Mart said it has tripled its online assortment since last year and will lower prices on thousands of items, including 400 toys. Amazon opened its Black Friday Deals store on its website last week.

"The more popular the item the sooner you want to buy it and the less it matters where you buy it," Anderson said when asked what consumers should expect during the Christmas shopping season. "But the less mainstream the item, the likelier you want to shop around and see who's got it and who has the best price."

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