Price war brews between Amazon and Wal-Mart

Price war brews between Amazon and Wal-Mart
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First Published: Wed, Nov 25 2009. 12 42 AM IST
Updated: Wed, Nov 25 2009. 12 42 AM IST
Ali had Frazier. Coke has Pepsi. The Yankees have the Red Sox.
Now Wal-Mart Stores Inc., the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com Inc.
In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.
The tussle began last month as a relatively trivial, but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this autumn. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven, a 45-year-old toy from Hasbro Inc. that usually heats up small cakes, not tensions between billion-dollar corporations.
On 18 November, Wal-Mart dropped the price of the oven to $17 (Rs792 today), from $28. Later the same day, Amazon cut its price, which had also been $28, to $18.
“It’s not about the prices of books and movies anymore; there is a bigger battle being fought,” said Fiona Dias, executive vice-president at GSI Commerce Inc., which manages the websites of large retailers. “The price sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon.”
This fight is about the future. Rapid expansion by each company, as well as profound shifts in the high-tech landscape, now make direct confrontation inevitable. Though online shopping accounts for only around 4% of retail sales, that percentage is growing quickly. E-commerce did not suffer as deeply as regular retailing during the economic malaise, and it is recovering faster than in-store shopping. People are also shopping on smartphones and from their HDTVs. Amazon has harnessed all of these trends, and is also behaving more like a traditional retailer. This fall it expanded its white-labelling programme, slapping the Amazon brand onto audio and video cables and other products, and introduced same-day shipping in seven cities, trying to replicate the instant gratification of offline shopping.
More important for Wal-Mart, sales in Amazon’s electronics and general merchandise business—which competes directly with much of the selection in Wal-Mart stores— were up 44%.
Many analysts are unsurprised that Wal-Mart executives have placed Amazon squarely in their sights, with public throwdowns in interviews and pointed discounting.
©2009/THE NEW YORK TIMES
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First Published: Wed, Nov 25 2009. 12 42 AM IST