business news in context, analysis with attitude

Bloomberg reports that "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 ... On goods such as food, Amazon’s prices were almost 60 percent more, though some items are cheaper, the study said."

The story says that "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."
KC's View:

The suggestion in the story is that Amazon's growth, which is at a faster rate than Walmart's albeit on a smaller base, is at least partially connected to the perception of low price that it enjoys, which may be at odds with reality.

There are a few things at work here. One is that perception is important. Always. Walmart has enjoyed the perception of lowest prices for a long time, and reality hasn't always backed that up.

I also think that value sometimes trumps price - and that Amazon offers value that can be found in terms of the greater convenience that some of us find in not having to actually go to the store, especially in certain categories.

To be fair, the price differential may not always account for what happens when people use Amazon's Subscribe and Save service, which can reduce prices 25 percent.

What this really points to, I think, is the fact that Amazon is going to have to do a better job on pricing if it is going to have the "clash of the titans" battle that I expect it will have with Walmart. I fully expect that it will ... because Jeff Bezos has shown nothing but total commitment to disrupting every category in which Amazon is involved.