In e-commerce, the term “price war” refers to more than just cheaper products and lower prices. It is a calculated move used by businesses to drive out rivals and increase their market dominance. Price wars in e-commerce, however, may be is not good to marketplace vendors, manufacturers, and even consumers. Both Amazon and Walmart are trying to appeal to customers who are budget conscious by offering more discounts.
Amazon intends to highlight inexpensive products from Chinese vendors, and Walmart is launching massive sales. The takeaway here is that both behemoths are going above and beyond in an effort to retain and grow their consumer base particularly among those who are most hit by the present economic downturn.
Amazon and Walmart Escalate Price Wars Race to the Bottom
This week, in their continuous struggle for the allegiance of price-conscious customers, retail giants Amazon and Walmart are stepping up their discounting efforts. According to reports, Amazon is planning to create a section with inexpensive products sent from China to customers abroad, following a cue from Temu and Shein, two of the biggest names in e-commerce. The online marketplace plans to start taking inventory in the autumn and integrate merchants in the upcoming months, according to the article. Particularly on important shopping holidays like Black Friday and Cyber Monday, Walmart and Amazon frequently fight prices.
One example of a calculated attempt to beat Black Friday sales was Amazon’s “Holiday Dash” event in 2020. Walmart had to react quickly as a consequence with its alluring offerings. Walmart started three online and in-store events on Thanksgiving, in place of the one deal that was customarily the first day of the holiday. Price war resulted from both of them offering huge discounts from small businesses and premium goods in a variety of categories, including toys, fashion, electronics, home, kitchen, and beauty.
What is Price Wars?
A pricing war occurs when companies persistently lower their product prices in an effort to increase sales and obtain a competitive edge. It starts with a brand lowering the price of a product, which forces other rivals to follow suit in order to keep customers. Price wars are a significant problem for online retailers, particularly in countries with high competition where consumers can quickly compare costs and move to less expensive options.
Current strategy of Amazon and Walmart
Amazon’s Strategic Shift
Amazon has just changed its strategy, as per e-commerce giants like Temu and Shein. It is planning to open a department devoted to inexpensive goods, mostly imported from China. This move demonstrates Amazon’s resolve to use global markets to expand the range of products it offers and draw in budget-conscious customers. An Amazon representative underscored the company’s dedication to increase client contentment via increased assortment, reduced costs, and improved expediency. With this strategy, Amazon may be able to both retain and increase its customer base.
Walmart’s Discount Drive
On the other hand, Walmart is intensifying its sales promotions. Following the success of its Walmart+ Week, Walmart announced “Walmart Deals,” a significant summertime sale that runs from July 8 to July 11. This is going to be Walmart’s “largest savings event ever,” which shows how far the retailer is prepared to go in order to appeal to consumers on a tight budget.
Reason for Price Wars in Amazon and Walmart
- In order to drive out rivals and grow or hold onto their market share, brands in fiercely competitive sectors frequently participate in online pricing wars.
- Price becomes a crucial differentiation for customers when items are comparable and replaceable. Furthermore, consumers may quickly evaluate product prices on online shopping sites, leading to price wars.
- Lower pricing from established companies might function as a cost barrier, reducing the incentive for new players to enter the market.
- Particularly for seasonal goods or things that are almost at the end of their product lifetime, overstocked shops lower prices to clear inventory.
Effects of Amazon and Walmart Price Wars
Price wars may have unintended consequences for companies. The benefits and drawbacks of pricing wars for retailers and brands are listed below.
- Although they have the potential to draw in more clients and boost sales, they may also have a temporary negative impact on profit margins.
- By luring clients away from other brands, brands that handle price wars well may increase their market share.
- Retailers that use it to get rid of extra inventory might use that space to create and launch new items.
- For small enterprises with limited resources, however, the e-commerce pricing battle can be difficult. Long-term operational sustainability and cost containment may prove to be difficult for them. And so, they may have to exit the market or be bought out by bigger corporations.
- Price war by Amazon and Walmart might cause consumers to believe that their goods and services are of inferior quality, which would be detrimental to the reputation and value of the brand.
- A pricing war may cause consumers to become price-sensitive and habituated to discounted items. It gets harder for businesses to go back to their original pricing levels as a result.
Is Price Wars between Amazon and Walmart Good for Consumers?
Most of e-commerce Price Wars are not for long time. Customers benefit from instant discount and enhanced affordability as a result of lower product costs. As part of the agreement, they could also receive extra goods and services. On the other hand, customers would eventually have fewer options if a big company aggressively lowers prices to force rivals out of business. This could potentially degrade the items’ quality.
The whole retail environment is changing as Amazon and Walmart intensify their markdown campaigns. Budget-conscious customers are the target market for both Amazon and Walmart, as seen by their incorporation of low-cost products from China and their massive discount events. For both shops and consumers, however, the problems of unstable finances and growing living expenses present formidable obstacles. The continuous pricing wars may have a wider effect on the retail sector, possibly making things difficult for smaller merchants and highlighting the significance of innovation and technology.
Niamh Prescott has a degree in Mass Communication and an MBA in Finance. She has worked for two media houses and is now running her own media company.