Wal-Mart Slashes Online Prices To Match Amazon...Does It Matter?

Wal-Mart's in-store prices have long been the lowest in the retail industry after decades of building a massive store footprint and subsequently beating vendors into submission.  That said, with brick-and-mortar sales continually being eroded by online sales, pricing dominance against Amazon is becoming far more important than in-store dominance against the likes of Target.

To that end, as Reuters points out today, Wal-Mart is seemingly embracing a new pricing war with Amazon this holiday season and now sports online prices that are nearly on par with the online retailing giant.

Now, the shrinking gap is also becoming noticeable across a broad range of product categories online, according to a price study conducted for Reuters, as well as interviews with pricing experts, retail consultants, vendors and company sources.


Prices at Walmart.com are now only 0.3 percent more expensive than Amazon on average, according to the study by retail data analytics firm Market Track, which analyzed prices of 213 products in 11 categories over a period of 700 days ending November 7, 2017.


By comparison, Wal-Mart’s online prices were 3 percent higher than Amazon’s on average in the first 350 days ending November 7, 2016, according to the study.


In the popular wearables category, which includes fitness trackers and smart watches, Wal-Mart’s prices are 6.4 percent lower than Amazon this year compared to 12.6 percent higher in the same period a year ago. For sports and outdoor products, Wal-Mart is now 1.3 percent lower versus 3.5 percent higher a year ago.

Price Check

Of course, the question remains whether Wal-Mart will be able to maintain consistently lower pricing which is key to boosting sales throughout the year...particularly against a competitor who has repeatedly demonstrated a willingness to lose money in favor of market share gains.

On Cyber Monday, the busiest day of the year for internet shopping, online deals and temporary promotions will overshadow pricing for both retail giants.


“We are committed to having online prices that meet or beat prices at other top sites,” said Wal-Mart spokesman Dan Toporek. He said for some items the retailer now displays two prices online to show shoppers when they can get a lower price by picking up their order in a store, but declined to comment further on the company’s pricing strategy.


Amazon spokeswoman Kate Scarpa said nothing has changed in the retailer’s approach to delivering low prices to customers.


“Amazon’s prices are as low or lower than any other retailer and we work hard for customers to ensure that’s true every day,” she said, declining to comment further on the retailer’s pricing strategy.

So far the lower online pricing strategy is paying off for Wal-Mart, at least in terms of market share gains, but it has come at a cost of over $1 billion in pricing "investments".

Online sales at the world’s largest retailer grew 50 percent year-over-year in the most recent quarter, helping it post its strongest quarterly U.S. revenue growth in nearly a decade. It now accounts for 3.6 percent of total U.S. online sales in the 12 months to October 2017, up from a 2.8 percent share a year ago, according to digital research firm eMarketer.


Even with this progress, Wal-Mart has a long way to go. Amazon’s share of the U.S. e-commerce market stands at 43.5 percent. About half of U.S. households are estimated to have Amazon Prime subscriptions, Cowen and Co has predicted, making them less likely to comparison-shop.


What is more, the retailer said last year and again this October month that it would slow down the rollout of new stores and divert that capital expenditure towards becoming more competitive online.


“Right now the better use of cash is to compete with Amazon and invest that in the business, because if anyone has a fighting chance to stand up to Amazon, it is Wal-Mart,” said Charles Sizemore, the chief investment officer at Sizemore Capital Management, which owns Wal-Mart shares.

Meanwhile, the real question is whether Wal-Mart can match not only Amazon's pricing, but the overall customer experience which has made it dangerously easy to shop online while constantly promising faster and faster delivery times.  As the Financial Times recently pointed out, at wall street doesn't think Wal-Mart has a shot...

...and here's another look at how Amazon's market cap has performed so far in 2017.

So what say you? Is Amazon an unstoppable force in the retail industry or are market gains in 2017 just a reflection of a massive tech bubble?