Amazon Remains the Online Price Leader, But the Gap is Closing

This year has seen a marked rise in industry chatter about a “price war” among leading online retailers, with major media outlets like Recode reporting that “ … in recent months [there] has been a high-stakes race to the bottom between Wal-Mart and Amazon.com.” Other retailers have also felt the pricing crunch, with 72 percent of retailers reducing prices, according to an Economist Intelligence Unit study.

Most of these claims, however, are based on surveys of industry executives or very limited samples of data, often analyzed over very short time periods.

A new pricing study completed by Profitero, an e-commerce analytics firm, aims to illuminate this dynamic with a much larger scope and stronger methodology than previous studies. Profitero analyzed daily data for more than 52,000 identically matched products (same UPC, brand, and pack configuration) across 13 categories and 15 retailers from June 2017 through August 2017.

Retailer Price Index to Amazon by Category, Part 1

Profitero determined that, on average, Amazon was 11 percent less expensive than Wal-Mart, Jet, Target, and category specialists like The Home Depot, with the lowest prices in 12 of the 13 categories analyzed.

Wal-Mart emerged as the price leader in the beauty category, with average prices 1 percent less expensive than Amazon.

While Amazon remains the online price leader, it’s clear that Wal-Mart is on the offensive, with prices just 3 percent more expensive than Amazon. Wal-Mart has closed the gap with Amazon from the 9 percent Profitero found in a 2014 study.

Wal-Mart still lags Amazon in discretionary hardline and softline categories like electronics, office supplies, video games, and tools and home improvement. These categories are proving to be challenging for other retailers as well, with average prices 19 percent higher than Amazon’s.

In contrast to Wal-Mart, Target did not close its gap with Amazon between the 2014 and 2017 studies. And most category specialists, like Staples for office electronics and supplies, and Walgreens for vitamins and supplements, are also struggling to remain price-competitive. On average, category specialists were 26 percent more expensive than Amazon, with Walgreens and Staples being 49 percent and 41 percent more expensive, respectively. These retailers appear to be competing on nonprice factors like convenient store locations, knowledgeable employees and premium in-store experiences.

Still, there are some standouts among the category specialists. For example, Chewy, a specialty online retailer of pet products, was only 7 percent more expensive than Amazon.

As e-commerce continues to outpace total retail growth, price transparency and the desire to remain price competitive are pressuring suppliers, manufacturers and retailers to establish clear and sustainable strategies to compete on price, value and customer experience.

Retailer Price Index to Amazon by Category, Part 2

The full report, Price Wars: A Study of Online Competitiveness, can be downloaded here.

Keith Anderson is the senior vice president of strategy and insight at Profitero, where he helps global brands and retailers gain a deeper understanding of their online presence to optimize online and in-store sales..