Elle Meyer

ACC548

Dr. Robinson

8 April 2023

Amazon and Walmart Pricing Decisions

For this week’s article, I read a piece entitled “Amazon and Walmart are in an all-out

price war that is terrifying America’s biggest brands” written by Jason Del Ray. Like our

weekly reading, this article describes the major factors that have an impact on pricing decisions;

customers, competitors, and costs (Rajan, Horngren, Datar, et al, 2021). The article suggests

how Walmart needed to make a change to their “Everyday Low Price” strategy. The competition

as well as supplier costs have changed the strategy Walmart implemented for pricing decisions

(Del Ray, 2017).

Jason Del Ray starts out by stating how Walmart’s “Everyday Low Prices” strategy has

begun make the company be beat on prices. (Del Ray, 2017). This forced the company to re-

evaluate their expectations from their suppliers, insisting they have the lowest price on 80

percent of their sales (Del Ray, 2017). However, to make this happen, suppliers would have to

cut their wholesale prices or make cost cuts of 15%, losing money themselves. This pricing

decision is for Walmart to have competitively low prices compared to other retailers, while

suppliers need to make a pricing decision on whether to lose money on individual sales but

benefit from distributions and the brand of a larger retailer (Del Ray, 2017). The decision

Walmart made for “Everyday Low Prices” was directly impacted by Amazons increased

aggressive position on their packaged goods (Del Ray, 2017). As Amazon and Walmart have
increased competition, suppliers have felt the pressure of meeting their pricing decision demands

(Del Ray, 2017).

On the side of Amazon, the company has implemented pricing algorithms. These

algorithms allow for Amazon to match or even beat the prices from other websites to win over

customers (Del Ray, 2017). The downfall of this is when Amazon loses money when selling

individual items at the lowest prices as they are not receiving those items at the lowest wholesale

costs (Del Ray, 2017). Amazon CEO, Jeff Bezos, was willing to lose money for a period if they

were going to continue to challenge Walmart in the retail industry (Del Ray, 2017).

The competition created in the retail market between Amazon and Walmart has directly

impacted their pricing decisions for the future. Customers, as well as suppliers, have influenced

their wholesale prices. Based on our reading, companies that operate in a very competitive

market, have little to no control over the prices and costs of products (Rajan, Horngren, Datar, et

al, 2021). The pricing that is set by suppliers can help Amazon and Walmart set quantities that

can help maximize their net income overtime (Rajan, Horngren, Datar, et al, 2021).

As this article was first introduced in 2017, Amazon and Walmart had to make pricing

decisions for the long run. As Amazon’s CEO Jeff Bezos was willing to lose money for a

period, it is now clear that this strategy has worked out for them. Managerial accountants can

help these companies choose the appropriate pricing strategies to help improve their bottom line

(Rajan, Horngren, Datar, et al, 2021). Based on our reading, it is clear managers will use a

market-based pricing approach when they are involved in a competitive market. As products

that are offered by Walmart can be substituted by other products Amazon possess, they are

forced to accept costs set by the market, in this case, suppliers.

 Managerial accountants can help these companies by providing them with valuable

analyses and financial information. Through cost analyses, profitability analyses, and sales

forecasting, managerial accountants will not only help make pricing decisions on their products

but can also impact the future of sales (Rajan, Horngren, Datar, et al, 2021). Pricing decisions

can have a huge impact on the company’s bottom line, and management accountants can help

keep the decision in alignment with organizations goals.

 Works Cited

Rey, J. D. (2017, March 30). Amazon and Walmart are in an all-out price war that is terrifying

America's biggest brands. Vox. Retrieved April 9, 2023, from

https://www.vox.com/2017/3/30/14831602/amazon-walmart-cpg-grocery-price-war

Datar, Srikant M., and Madhav Rajan. Horngren’s Cost Accounting: A Managerial Emphasis.

17th ed. Pearson Education, 2021.