Walmart and Amazon both recently changed their price matching policy, and the changes may be a harbinger of things to come in the retail world.
Walmart would match a competitor’s price if a shopper showed an ad for the same product, while Amazon’s shift is in regards to a price drop for a recently purchased item.
If the price of a product dropped within 7 days…the customer would receive the difference. The assumption is that third party applications that track refunds have made an impact on how Amazon adjusts its pricing algorithm and has resulted in lowering margins retroactively.
As a former retailer who has matched pricing from Amazon, I was able to see Amazon dropping at cost or even below cost at times and offer some of the lowest prices around.
As a former competitor to Amazon, I saw long ago the need to “get out of their way”…but that’s another story.
While this policy made it hard on competitors to compete, lower prices helped Amazon build a loyal customer base and grow its business.
The change in the refund policy addresses this “hole” third party applications exposed, enabling Amazon to continue their pricing fluidity without retroactive harm.
In fact, Amazon has managed to build their business into one of the most searched upon properties on the web, rivaling even Google in that regard. Amazon’s growth in search has been well documented — pegging them at taking 44% of all direct searches for products, over search engines at 34% and all other retailers at 21%.
With the billions spent on ads on properties like Google, Facebook et al., Amazon’s “control” in this space equates to billions in savings on advertising and a massive competitive advantage.
The shift in the Walmart’s refund policy is also interesting. Walmart feels they no longer need to price match competitors, which signals that they feel they have a strong enough brand to support the elimination of the perceived “lowest price guarantee policy”.
Over the years, Walmart has also managed to establish itself as a retailer with a powerful physical and online presence. With continued investments in logistics, which help support lower prices, they are in a unique position to compete with Amazon and have done a superb job transitioning from a traditional retailer in the face of technology changes this past decade.
But shifting their refund policies in the face of competitors who maintain their “lowest price guarantee” goes against what consumers have come to expect from retailers for decades.
The only conclusion we can make from this change is both Amazon and Walmart must feel comfortable enough with their brands to the point where they feel they won’t easily lose customers.
The Threshold Shift
In the evolution of the retail industry, this change signals a shift in what both retailers believe to be the threshold for consumer abandonment.
Amazon and Walmart feel that their competitors have been weakened to the point where they are no longer a credible threat — and their customer base is loyal to a point where both retailers have established themselves in the marketplace as THE places to shop.
For Walmart and Amazon, it is now time to begin increasing margins in a calculated way. And the adjustments in their refund policies are a small first step in that direction.
With Amazon’s ancillary services like Prime, Echo and efficient logistics, they’ve got great complementary components that competitors can’t match. And Walmart’s physical presence, size, matching logistics and continued innovation they are the only real rival to Amazon.
Any slight price “increases” will likely outweigh the benefits of shopping elsewhere.
With the already strong perception of great prices, selection and service, consumers know they can get what they want, at a good price efficiently. Why should they take a chance on any other brand?
In the grand scheme of things, it appears we have just reached the point of a new evolution in retail.
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