Amazon, Walmart Intensify Price Wars: Race to the Bottom

In e-commerce, the term “price war” refers to more than just cheaper products and lower prices. It is a calculated move by companies to squeeze out rivals and increase their market dominance. However, price wars in e-commerce can be bad for sellers, manufacturers, and even consumers. Both Amazon and Walmart are trying to attract budget-conscious customers by offering more discounts.

As Amazon aims to promote inexpensive products from Chinese suppliers, and Walmart launches massive sales, the bottom line is that both giants are doing everything they can to retain and expand their customer base, especially among those most affected by the current economic crisis.

Amazon, Walmart Intensify Price Wars: Race to the Bottom

This week, in their ongoing battle to win the loyalty of price-conscious shoppers, retail giants Amazon and Walmart are stepping up their discounting efforts. Amazon is reportedly planning to create a section for inexpensive products shipped from China to customers overseas, following the example of Temu and Shein, two of the biggest names in e-commerce. According to the article, the online marketplace plans to start taking inventory in the fall and integrate sellers in the coming months. Especially on major shopping holidays like Black Friday and Cyber ​​Monday, Walmart and Amazon often fight over prices.

One example of a deliberate attempt to beat Black Friday sales was Amazon’s “Holiday Dash” event in 2020. Walmart had to react quickly with enticing deals. Walmart launched three online and in-store events on Thanksgiving Day, instead of the one deal that usually took place on the first day of the holiday. The price war ensued as both offered huge discounts from small businesses and premium goods across a variety of categories, including toys, fashion, electronics, home, kitchen, and beauty.

What is a price war?

A price war occurs when companies continually lower the prices of their products to increase sales and gain a competitive advantage. It starts with a brand lowering the price of a product, which forces other rivals to follow suit in order to retain customers. Price wars are a serious problem for online retailers, especially in highly competitive countries where consumers can quickly compare costs and choose cheaper options.

Current Amazon and Walmart Strategy

Amazon’s Strategic Change

Amazon has just changed its strategy, in line with e-commerce giants like Temu and Shein. It plans to open a section dedicated to inexpensive goods, mostly imported from China. The move shows Amazon’s determination to use global markets to expand its product range and attract budget-conscious customers. An Amazon representative emphasized the company’s commitment to improving customer satisfaction by increasing selection, reducing costs, and improving speed. With this strategy, Amazon may be able to both retain and grow its customer base.

Walmart Discount Campaign

Walmart, on the other hand, is stepping up its sales promotions. Following the success of its Walmart+ Week, Walmart has announced “Walmart Deals,” a major summer sale that will run from July 8 to 11. It will be Walmart’s “biggest savings event ever,” showing how far it is willing to go to attract budget-conscious shoppers.

The Reason for the Price Wars at Amazon and Walmart

• To outperform rivals and increase or maintain market share, brands from highly competitive sectors often engage in online price wars.
• Price becomes a key differentiator for customers when items are comparable and interchangeable. In addition, consumers can quickly evaluate product prices on online shopping sites, leading to price wars.
• Lower prices offered by established companies can act as a cost barrier, reducing the incentive for new players to enter the market.
• Especially when it comes to seasonal items or items that are nearing their expiration date, surplus stores lower their prices to clear out inventory.

The Effects of Amazon and Walmart Price Wars

Price wars can have unintended consequences for businesses. Below are the benefits and drawbacks of price wars for retailers and brands.

• While they have the potential to attract more customers and increase sales, they can also have a temporary negative impact on profit margins.
• Brands that handle price wars well can increase their market share by drawing customers away from other brands.
• Retailers looking to get rid of unnecessary inventory can use this space to create and launch new products.
• For small businesses with limited resources, however, the battle over e-commerce pricing can be difficult. Long-term operational stability and cost containment can be difficult for them. As a result, they may have to exit the market or be bought out by larger corporations.
• The price war between Amazon and Walmart could cause consumers to perceive their goods and services as being of inferior quality, which could damage reputation and brand value.
• A price war can cause consumers to become price sensitive and accustomed to discounted products. As a result, it will be harder for companies to return to their original price levels.

Are price wars between Amazon and Walmart good for consumers?

Most e-commerce price wars don’t last long. Customers benefit from immediate discounts and increased affordability as a result of lower product costs. They could also receive additional goods and services as part of the deal. On the other hand, customers would ultimately have fewer options if a large company aggressively lowered prices to force rivals out of business. This could potentially reduce the quality of products.

The entire retail landscape is changing as Amazon and Walmart ramp up their price-cutting campaigns. Budget-conscious shoppers are a target audience for both Amazon and Walmart, as seen in their inclusion of inexpensive products from China and their massive discount events. But for both stores and consumers, the challenges of unstable finances and rising living costs are major headwinds. The ongoing price wars could have a broader impact on the retail sector, which could make things difficult for smaller retailers and underscore the importance of innovation and technology.