business news in context, analysis with attitude

The Wall Street Journal this morning reports that Walmart has adopted a policy of charging more for “some products” - including “boxes of Kraft Macaroni & Cheese, Colgate toothbrushes and bags of Purina dog food “ - on its website than it does in its stores.

While this is not unusual for a retailer operating in both physical and virtual spheres to charge more online, the Journal notes that “the move is unusual for Wal-Mart, which has long honed an ‘everyday low price’ message and has worked to keep online prices at least as low as shoppers find in its 4,700 U.S. stores … Wal-Mart previously aimed to keep online and in-store prices equal for many of its most popular products, unless competition drove them lower. But the company is experimenting with a new system, which has at times resulted in higher web prices for goods that would otherwise be unprofitable to ship.”

The story points out that at least in some cases Walmart’s site is transparent about the difference in prices. Walmart’s online prices also “often” match prices on Amazon.

Marc Lore, president/CEO of Walmart eCommerce U.S., has said that it simply is cheaper to sell products in-store than online, and that the higher costs of e-commerce are reflected in the higher prices.
KC's View:
I have to wonder if this approach is going to have the effect of diluting Walmart’s ability to compete with Amazon.

The Journal says that while Walmart clearly is focused on driving online revenue, there also is some concern with profit … which in most circumstances would not be seen as a negative. But one of the things that Amazon brings to the table is the ability - because of things like Amazon Web Services - to underwrote lower prices when and where it needs to. It was just last week that we reported about how Amazon is discounting products from third party merchants, and eating the losses itself; Amazon does this because it has identified opportunities and is able to act on them.

I’ve always argued that one of the great differences between Walmart and Amazon is that Walmart wants to sell more stuff while Amazon wants to create an ecosystem that transcends the mere sales process. (I’d also argue that another difference is that Marc Lore wants to be Jeff Bezos while Jeff Bezos actually is Jeff Bezos.)

It remains to be seen if Amazon’s approach is viable and sustainable in the long run. It certainly is the bigger swing … and I’m a big fan of big swings.