Adopting Amazon’s strategy
A huge product selection, competitive pricing, and fast—and sometimes free—delivery services are some of the factors that have helped to set Amazon (AMZN) apart from the competition in the retail industry.
However, its rivals are increasingly adopting its tactics to try to steal its share of the online retail market. In doing so, these rivals sometimes study Amazon’s business, including how it has priced items, for clues on how to adjust prices on their own sites.
Amazon thwarts Walmart’s engineers
However, it turns out that Amazon has figured out how to prevent its rivals from looking into its site for ideas on product pricing, for instance. According to a Reuters report, earlier this year, Amazon shocked Walmart (WMT) by blocking its engineers from checking its pricing details. Before that, Walmart’s engineers would use software programs to study Amazon’s prices several million times a day and use the data to try to undercut Amazon in terms of price to drive sales on its own site.
Amazon reported sales of $35.7 billion in 1Q17. Slice Intelligence estimates that Amazon took 43.0% of all Internet retail sales in the United States (SPY) in 2016. E-commerce is Amazon’s primary source of revenue in the same way that advertising is the lifeline of Facebook (FB) and Alphabet (GOOGL).
Pricing strategy is central to e-commerce competition
In the e-commerce space, a price difference of even a few cents can have a huge impact on consumers’ shopping decisions. This explains why online retailers constantly engage in price wars, and Amazon is proving that it’s smarter than the competition on this front.
In addition to using bots to keep competitors away from its pricing data, Amazon also uses such technology to recommend products to customers, saving shoppers time and potentially leading to more sales.