At one point or another you have made an Amazon purchase. The Amazon pricing strategy is what keeps people purchasing. Whatever you were looking for whether it was apparel, toiletries, or electronics, Amazon has it. With the click of a button customers buy exactly what they want a discounted price. Let’s not forget Prime members eligibility for free shipping on products as quickly as overnight. Amazon’s pricing strategy is different than its competitors by a landslide as it tackles industries preventing competition from keeping up. The following looks further into the Amazon pricing strategy, why it works, and whether competition can counter.
Amazon’s Pricing Strategy
The Amazon pricing strategy crushes the competition due to the number of adjustments and speed in a single day. In 2013, Amazon had changed prices on about 40 million products in just one day. By the end of that year the number had doubled to 80 million price changes during a single day. How would competition keep up with this? With Amazon’s pricing strategy, they fluctuate their prices at a rate that competitors such as Wal-Mart, Target, Best Buy, and Toys R Us cannot battle. While Amazon can alter their prices by the thousands per day, their counterparts only reach the hundreds range. This overload of price changes is one that many people may not even notice, but it keeps Amazon ahead of the pack in more ways than one.
Amazon is focused on keeping prices low and offering a wide selection. Due to the deals that they have daily, they are able to achieve this with ease. Their customer base is loyal and ultimately benefit resulting in Amazon benefiting as well. Amazon is viewed as innovative and does not really focus on having competition. They set the bar and set the bar high enough to excel above any brands that were deemed viable competitors. Amazon continuously take over industries whether it’s electronics, book stores, apparel, or media. They have created a system that at this point cannot be countered.
Why the Strategy Works
Amazon has two key secret weapons: convenience and being anticipatory. Amazon is quite the rival with Wal-Mart as they both offer low prices and a vast product selection. The proximity for most people to a Wal-Mart is around 10 miles. What sets Amazon apart from the standard of low prices is that they cater to their customers. The goal is to make lives easier. There are so many ways that they have implemented this by making shipping faster, serving as an aide in entertainment with products like the Amazon Echo. There’s even ways to replenish products you need with Amazon Alexa Dash wand. The convenience of never having to leave your house whether it’s for large or minor things will always work to Amazon’s advantage.
Anticipating what’s next is a silent secret weapon Amazon has that competitors may or may not notice. Their marketing strategy uses data that gives customers what they want. Competition, in a way, is nonexistent. They are not following trends of what competitors are doing. They take the hard trends that exist and create their own models and strategies.
Amazon is really a well-rounded mastermind with its private label brands and logistics. While Amazon serves as a hub for other brands they have their own such as Amazon Basics and Elements. They have hundreds of warehouses, branded trailers, and the latest expansion, jets. Amazon understands their customers, what they want, and build around that. They do not dwell on failed venture. In fact, they embrace failures, move on, and keep evolving.
Amazon purchased Whole Foods for $13.7 billion back in June. With this purchase both Whole Foods and Amazon benefited. The stores would remain, but Amazon would be able to surge further into brick-and-mortar and expand their reach in the grocery industry. They already had AmazonFresh so this is just a step closer to total domination. With this purchase, Amazon has cut the prices of Whole Foods products from organic bananas and eggs to farmed salmon. The brand is quickly reshaping and burying the nickname “whole paycheck.”
Amazon’s CEO of Worldwide Consumer, Jeff Wilke, released a statement regarding the price cuts at Whole Foods: “We’re determined to make healthy and organic food affordable for everyone. Everybody should be able to eat Whole Foods Market quality – we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards.”
Staying true to the organic selection keeps the current and frequent shoppers buying from Whole Foods. On the other hand, lowering the prices puts competition under pressure. This includes: Kroger, Wal-Mart, Target, Costco, and Sprouts. Prices were cut as high as 43%. Ultimately, this transition will further benefit customers that have Amazon Prime. A lot of the competition does not offer nearly as much as Amazon Prime does, if there is any loyalty program at all. For $99 a year, Prime members have an all-inclusive package that expands beyond free shipping. How will the Prime membership work with Whole Foods?
If a loyalty program is incorporated, it would further collapse competitors in the grocery market. How will they be able to keep up? How will these price cuts affect their product selection prices? Amazon has a handle on their brand, but as they constantly evolve and change, competitors will have to find an edge of their own.
There are not many companies that come close to the success of Amazon. There’s only been one, Alibaba. At one point, they surpassed Amazon. Unfortunately, their downfall has propelled Amazon to new heights. The e-commerce race between the two may seem close, but Amazon is not slowing down any time soon. Does everything they touch turn to gold? Statistically, that just may be the case.