Discussed, feared, admired, difficult to imitate. At the moment, no one can overshadow it. With competitive prices and impossible to beat, even more so in its strategy of changes in real-time. What is your secret?
Pinterest, the leading Spanish pricing company, has carried out a study to learn about
Amazon’s reaction in real-time to price changes by its competitors. To do this, it has analyzed for 48 hours the price changes of 132 products in the online stores Amazon.com, MediaMarkt.es, Fnac.es, PcComponentes.es and ElCorteIngles.es. In total, an average of 30 price captures per hour was made over two days.
“Amazon’s formula for success is like that of Coca-Cola, coveted by all and at the same time indecipherable or difficult to match. That is why we have carried out an analysis of their pricing strategy, the cornerstone of their success, which no one had done until now,” says Antonio Tomás, CEO of Pinterest.
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Table of Contents
The Analysis and its Results
The conclusions of the analysis determine that of the 132 products analyzed, 96 have experienced at least one price change during the 48 hours of the study. In turn, these 96 products experienced a total of 378 price changes. Obtaining an average of 3.93 price changes per product.
Amazon is the one who registers the most price changes, 185, doubling the second in this ranking, MediaMarkt, with 91 modifications. Far behind are El Corte Inglés (38 changes), Fnac (35) and PcComponentes (29 changes).
Regarding the hours of the day in which the changes occur (the study was carried out between 11 a.m. on June 26 and 11 a.m. on June 28), Amazon is the only one that modifies its prices at any time, unlike their competitors who do them in one or two windows a day. This greater flexibility allows Amazon to react in “real time” to price changes from its competitors, with the minimum time detected being 6 minutes and 36 seconds after a change in MediaMarkt.
Also, You can find more helpful resources at Newcomputerworld.
Why this Quick Reaction from Amazon?
The answer is simple: Amazon’s strategy is to match the lowest price, but only for the minimum time necessary. Suppose Amazon stay equalled in price with the most affordable competitor, and the latter raises its price. In that case, Amazon will try to detect it as soon as possible to increase its worth as quickly as possible so that its loss of profitability is the minimum.
Some Price Positioning Strategies Detected on Amazon
- If Amazon is matched at the lowest price with one or more competitors and these competitors increase their price. Then Amazon, from its most suitable position. Increases its cost on average by 6% so that it continues to be the most affordable of all. Turn to improve your profit margin.
- If a competitor reduces its price and becomes the cheapest, then Amazon also reduces its price to match it. It is noteworthy that in the vast majority of occasions, it simply equals it. That is, it does not improve the competitor’s price.
- If a competitor makes a significant price reduction (close to or greater than 20%). Amazon, in its objective of matching the lowest price. Instead of doing it immediately, begins to reduce its worth until it reaches it progressively. It follows that it aims to measure the balance between price and demand as the competitiveness of its supply improves.
- If there is a similar price positioning situation in which Amazon is not the cheapest. Then, if it considers it appropriate, it will break this situation by positioning itself as the most reasonable with reductions close to 5%.
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