If Amazon Now, Walmart Later?
Amazon.com (AMZN.O) is big, but not that scary. The U.S. Federal Trade Commission sees it differently, accusing the e-commerce goliath of being so dominant it leaves sellers and customers with little choice.
Amazon.com (AMZN.O) is big, but not that scary. The U.S. Federal Trade Commission sees it differently, accusing the e-commerce goliath of being so dominant it leaves sellers and customers with little choice. Shopping habits vary widely, however, and the company’s pricing strategies are commonly used, including at Walmart (WMT.N).
The agency led by Lina Khan sued the $1.3 trillion company last month, alleging that it charges high fees for advertising and forces merchants to discount. According to the complaint, if Amazon finds a cheaper product elsewhere, it punishes the seller by removing merchandise from the “buy box,” effectively tanking sales. Thus, the argument goes, Amazon prevents rivals from competing on price. The company rejects the allegations.
Another part of the antitrust case relates to how regulators define the marketplace. The FTC designates the company led by Andy Jassy as an online “superstore” because it has accounted for at least 69% of the estimated general merchandise volume, excluding groceries, sold in the United States since 2015. Walmart, eBay (EBAY.O) and Target (TGT.N) make up the rest.
The prism through which the FTC is looking doesn’t necessarily reflect consumer behavior. People buy things in myriad ways, evidenced in part by the convergence of online and offline retail. Walmart provides a helpful comparison.
To start, it’s even bigger than Amazon in some ways. The Walton family’s chain generated over $170 billion more in sales last year, for example. In the real world, 90% of Americans live within 10 miles of a Walmart. Moreover, the $440 billion company is just as competitive on price.
In a collection of non-discretionary items such as shampoo and detergent, Amazon’s cart costs 4% more than Walmart’s, according to MoffettNathanson analysts.
Other practices are similar, too. Both companies sell fresh food, in addition to T-shirts and coffee tables. Walmart, which bought Jet.com in 2016 for $3 billion, is also just as discerning when it comes to online pricing. The company no longer threatens to boot merchants that fail to offer the cheapest price, but still seeks ones competitive on price, as well as shipping speed and cost, to feature in its “buy box.”
Not long ago, Walmart was a corporate pariah putting mom-and-pop stores out of business because its size enabled it to squeeze suppliers. Its tagline for nearly two decades was “Always Low Prices.” These industry dynamics make it harder to follow the FTC’s logic.
