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Kantar Study: Wal-Mart beats Amazon as low price leader

story by Kim Souza
ksouza@thecitywire.com

Online price transparency has heightened the competition between Amazon and Wal-Mart Stores and there is no sign either side is backing down, according to Kantar Retail analysts who recently released their second annual price comparison between the retail giants.

Contrary to popular belief, Amazon does not have lower “across-the-board” prices than Wal-Mart Stores Inc., according to the Kantar study. However, Amazon continues to gain market share with its loyalty programs and focus on customer service.

Analysts Robin Sherk and Anne Zybowski,also noted that these two retailers are seeking the same consumers with two different strategies. Kantar Retail ShopperScape, found that Wal-Mart shares half (51%) of its past four-week shoppers with Amazon, and Wal-Mart shoppers are twice as likely to frequent Amazon (19%) on a weekly basis than Walmart.com (9%).

However, consumers might be interested to learn that Walmart.com prices were 7% lower than Amazon on the basket of 59 items compared between Walmart supercenters, Walmart.com and Amazon. The supercenter had the lowest overall basket total – some 8% cheaper than Walmart.com and 16% less expensive than Amazon, according to the Kantar study.

Amazon does not claim to have the lowest price but it does push a customer-service message while offering competitive prices on millions of items, many of which can be delivered free in two days for Amazon Prime members. Amazon also believes in rewarding customer loyalty with special discounts for consumers who subscribe for automatic deliveries of certain key staples with the “Subscribe & Save” program.

Wal-Mart’s mission is to save people money as the lowest cost provider in retail every day, and to provide elite price competitiveness online every day.

EDIBLE GROCERY
There were 18 items in the edible grocery sub-basket and the biggest driver in the price discrepancies related to the third party items (products not held in stock by the retailer).

Kantar found that Amazon was heavily dependent on third party items with its recent expansion into grocery. Some 12 out of 18 items in Amazon’s sub-basket category were third-party items.

In comparison, none of the 18 items in Walmart.com sub-basket were third party. The study found that if shoppers just purchased those first-party items, Amazon’s pricing was on equal footing with Walmart Supercenter and 19% less than Walmart.com.

NON-EDIBLE GROCERY
There were 12 items in the sub-basket and again the Walmart Supercenter had the lowest overall total, 3% less than Walmart.com and 11% savings over Amazon.

Again it was the third party items that made the difference in the basket totals. The price differences were huge in this category among some items such as Windex Antibacterial Multi-Surface Cleaner — $2.47 at Walmart Supercenter, $7.07 at Walmart.com and $9.49 at Amazon.

All three retailers had same price on GLAD trash bags at $7.48, Mr. Cleaner Magic Eraser at $6.94 and Finish Powerball Tabs at $5.97.

Amazon won the pricing battle of Similac infant formula at 5.6% cheaper than Walmart.com and the supercenter prices. Bounty paper towels at Amazon were priced  5.7% less than the other two retail options.

Kantar notes that Amazon’s use of Subscribe & Save is an opportunity for the retailer to pick up steam in this category. Four of the 12 items in Amazon’s non-edible sub-basket were eligible for the Subscribe & Save option. Once these items were placed on subscription they became 5%-10% cheaper than at Walmart.com and the supercenter.

Walmart.com and the supercenter still had lower overall sub-basket totals, even with the  reduced subscription rates for the four eligible items at Amazon.

HEALTH & BEAUTY AIDS
There were interesting findings in the health & beauty aid sub-basket with complete parity between Walmart.com and the supercenter total prices. Three items – bar soap, pain killers and eye make-up – were out of stock at the Walmart Supercenter, while the cotton swabs were out of stock at Walmart.com.

Amazon’s sub-basket was 6% more expensive than the other retail options. Six of the 13 items in this sub-basket were third party items for Amazon, which resulted in the higher prices.

GENERAL MERCHANDISE
Amazon was 7% more expensive than the supercenter and 4% cheaper than Walmart.com in the general merchandise sub-basket. But the bigger difference was found between Walmart.com and the supercenter with an 11% price gap in favor of the physical store.

Amazon offered a 50% savings on the XBOX 360 - Call of Duty Black Ops II videogame over the Walmart Supercenter price and came in 28% cheaper than Walmart.com. But both Walmart prices came in 26% cheaper on TaylorMade golf balls than Amazon.

There were several wide price gaps in this sub-basket for the same items, a reminder to consumers to compare prices item by item when shopping online.

KANTAR INSIGHTS
As Walmart.com is focused on vying with Amazon, Kantar expects to see price volatility increase in the next year, particularly in general merchandise as Walmart.com ramps up item offerings and increases the number of third-party relationships.

Kantar said if Walmart.com is going to accelerate its position against Amazon it must find a way to balance its third party assortment expansion while also driving strong online price impressions.

“This will be tricky,” Sherk noted. “It will involve innovative means in additions to price matching, such as showing shoppers price visibility over time or new digital comparison tools versus competitors.”

She anticipates that as Walmart.com becomes more aggressive in advancing its website offerings, it will look to supplier’s support in the process.

Zybowski notes that Amazon’s Subscribe & Save is win-win-win for the shopper, Amazon and the supplier because it locks in loyalty to the item purchase on a replenishment basis. While there is a 5% base incentive or reward for the loyalty, the primary motive is convenience, not price.

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“It’s a double win for shoppers as it saves them time and money. This loyalty is a real threat to many trip drivers to a Walmart Store,” Zybowksi noted in the report.

Amazon also has raised the incentives to 15% when five items are ordered for the same delivery time. This may be of great interest to Amazon Mom Prime shoppers who already earn 20% off of eligible items.

Zybowski said as online shoppers get a larger discount and fewer boxes, Amazon wins as it saves on packing and efficiencies within the supply chain.

Early data last year showed the new subscription program was gaining traction with Gen Yers and Baby Boomers. There were 5% of Walmart shoppers using the Subscribe and Save option a year ago. Zybowski said this is a real concern for Wal-Mart Stores because shoppers are no longer going to the physical shelf for these items which makes it difficult to win back their business or capture other sales while the consumer is in the store.

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