Assignment on case Study:

AMAZON vs WALMART
FIGHTING IT OUT ONLINE ON PRICE

Submitted by:
Name: Md.Zahidul Hasan

ID: 2018200410047

Batch:3rd

Section: 2(evening)

Dept. of Textile Engineering, SEU

Submitted to:
Name: Nazmul Ehsan

Senior Lecturer

Dept. of Textile, SEU

Submitted on 25th May 2021

Summary of Case Study:
In case you haven‟t noticed, there‟s a price war going on—
between Walmart, by far the world‟s largest retailer, and
Amazon.com, the world‟s largest online merchant. The price war
between Walmart and Amazon.com began prior to the 2009
holiday season, with skirmishes over online prices for new books
and DVDs. It then escalated quickly to video game consoles,
mobile phones, and even toys. At stake are the fortunes of not
only the two companies but also whole industries whose products
they sell, both online and in retail stores. Walmart‟s total sales of
$405 billion are 20 times Amazon‟s $20 billion annual take. But in
terms of online sales, Amazon‟s annual revenues are 12 times
greater than those of the retail giant. For Walmart, this battle is
about the future, as online sales grow at a much faster rate than
store sales. Walmart is engaging Amazon with the weapon it
knows best, low prices. However, although price can be a potent
strategic weapon, it can also be a double-edged sword. The two
combatants run the risk of pricing themselves out of profits.
Finally, such price wars can cause damage to entire industries.
“When your product is treated as a loss leader, it lowers its
perceived value.” The outcome of this battle is yet to be
determined. Walmart trumps Amazon on size. But Amazon is the
expert when it comes to creating personalized online experiences.
• Amazon has come a long way from its roots as small Internet
start-up selling books online. In addition to books, Amazon now
sells millions of new, used, and collectible items.
• Amazon.com would like to be “The Walmart of the Web,” and it
is indeed the Internet‟s top retailer. But in 2010, another firm
emerged as a serious challenger for the title of „Walmart of the
Web‟:Walmart.
• In contrast with Amazon, Walmart was founded as a traditional,
off-line, physical store in 1962, and has grown from a single
general store managed by founder Sam Walton to the largest
retailer in the world with nearly 8,000 stores worldwide.
• Amazon has developed extensive warehousing facilities and an
extremely efficient distribution network specifically designed for
Web shopping.
• Walmart also brings a strong hand to the table. It is an even
larger and more recognizable brand than Amazon. Consumers
associate Walmart with the lowest price, which Walmart has the
flexibility to offer on any given item because of its size and ability
to keep overhead costs to a minimum. Walmart can lose money
selling a hot product at extremely low margins and expect to
make money on the strength of the large quantities of other items
it sells.
• A Walmart on the out skirtsof Chicago is testing a drive-through
window, similar to those found at pharmacies and fast-food
restaurants, where shoppers can pick up their Internet orders.
• The most high profile area where the two companies have done
battle is in online book sales.
• The feud between the two sites has spilled overinto other types
of merchandise. Amazon and
Walmart.com have competed over Xbox 360 consoles, popular
DVD releases, and other big-ticket electronics.
Questions with Solved:
1.Can consumers actually determine whether Amazon or
Walmart has lower overall prices? Explain.
Ans: Consumers can determine whether Amazon or Walmart has lower
overall prices by comparing a certain product from Amazon to Walmart. As
a consumer, I go online to compare whether, for example, a phone case is
cheaper on Amazon or at Walmart. However; I realized that the product
may be cheaper by 2 or 3 dollars, however when you factor in the shipping
and handling costs as well as the time it takes for the product to arrive,
Walmart‟s product outweighs Amazon‟s in price.

2. For Amazon and Walmart, is it more important to have

lower prices or to have the perception of lower prices?
Ans: I believe in Walmart and Amazon's case, both believe it is more
important to have lower prices. Walmart's slogan, 'Low prices. Everyday.
On everything" and their commitment to price match is a key factor in
showing that low prices are important in order to help meet the needs and
wants of consumers. Jeff Bezos puts his success story in three simple
words: "Obsess over customers" and by doing so, Amazon also shows that
they believe it is more important to have lower prices. Especially since in
many states, they are not charged with overhead costs or taxes.

3. Just how far should either Amazon or Walmart take the

tactic of warring on price? Base your answer on Figure 11.1
in the text.
Ans: As the text states, I believe if they lower their prices significantly,
consumers will perceive that the product has little or no value, which may
cause them to target different products that may not be part of a product
mix. Firms want to look for a set of prices that maximize its profits on the
total product mix. They should offer product lines and bundles so they are
able to make a profit, as opposed to selling, for instance, an iPhone
separate from its charger, separate from the headphones, and etc. These
products need to be used together anyway. If Walmart and Amazon
continue to fight over the lowest possible price, customers will begin to lose
interest as the product begins to lose its value and as opposed to a portion
of the general population having the item, everyone will have it.

4. In the battle for online dominance, just how important is

low price? How important are the other benefits that Amazon
and Walmart each deliver?
Ans: When it comes to online dominance, low prices are very important. It
is as easy as opening a new tab and clicking on another webpage that
would be have a cheaper product. The convenience makes it important,
since their options are easy to get to. The other benefits Amazon and
Walmart offer are also important since they set them apart from
competitors. While Walmart has lower prices, if Amazon has a slightly
higher price but offers free 3-day shipping, many customers would choose
Amazon for the added benefits. When price does not set a company apart,
the services they offer will.

THANK YOU