360pi: Meeting Amazon prices doesn’t guarantee success

Ottawa, Canada - Trying to stay competitive with Amazon.com on price may not be the best path to success for department store and discount retailers. According to pricing analysis of 1,000-plus household goods based on Amazon’s own assortment relative to Kohl’s, Walmart, Target and Macy’s conducted by 360pi and Retail Systems Research from March-June 2014, Kohl’s was consistently 30%-60% above Amazon’s pricing for this sample, but also reported the healthiest financials of the group.

In the same category and timeframe, Macy’s was consistently 20%-40% above Amazon until April 2014, then lowered its prices to be more competitive. 360pi/Retail Systems Research analysis indicates this likely contributed to missed second quarter expectations for Macy’s.

Meanwhile, Wal-Mart has consistently been underpricing Amazon in the household goods category since mid- January 2014. Together, Target and Walmart have closed the pricing gap with Amazon to within a 5% range in July, compared to a 30% spread in fall 2013. At the same time, however, Wal-Mart and Target have both experienced under-performing sales and financial losses, while Amazon is experiencing mounting pressure to improve profitability.

“We found this particular analysis fascinating because it puts a very large mirror on the pricing strategy that so many retailers fall prey to, the race to the bottom in which no one wins the gold medal,” said Jenn Markey, VP marketing, 360pi. “This holiday season will be a test to see which retailers will get it right by being responsive to the competition rather than reactive, and leverage a combination of loyalty programs with personalized offers and a unique assortment to deliver on the brand promise conveyed to their target shoppers.”

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