While over the past two decades, Amazon gradually became the world’s largest online retailing monopoly by constantly undercutting its competitors on prices, resulting in deeply negative profit margins for years (offset by AWS), that changed in recent years when Amazon started flexing its monopoly muscles, gradually raising prices which it could do thanks to its dominant market position.

As a result, when it comes to most prices in the electronics bucket, Amazon has some of the highest online prices now compared to such upstart online competitors as Walmart and Target, which are now in the unenviable position of having to undercut Amazon’s prices to win market share.

So is it indeed the case that Amazon’s prices are now above its competitors? Not necessarily.

This morning, Goldman published the takeaways from week 3 of its annual holiday pricing survey in which the bank captured the online prices of selected baskets of goods at WMT, TGT, AMZN, KR, ULTA, M, KSS, WSM, BBBY, JWN, DKS and Sephora as of November 10th. The product categories captured in this survey encompass consumer electronics, toys, HPC & consumables, kitchenware & houseware, activewear, and beauty (because of the earlier start to the season, the bank is comparing the third week of holiday deals this year, November 10th, to the third week of deals last year, December 12th).

Here are some of the key observations:

  • Much of the shipping related promotional activity seen start in Week 2 persisted into Week 3, with some companies starting new offers, including Ulta’s offer of free shipping with no minimum and Macy’s $5 discount on same-day delivery. With capacity constraints and shipping surcharges, this dynamic is likely to be a headwind to gross margins this holiday season.

  • From pricing standpoint, there were higher promotions across all categories (particularly toys and kitchen/home baskets) on October 13th (which was day 1 of Prime Day) versus November 10th and October 27th. The pricing activity was mixed when comparing this week’s prices with October 27th as toy prices remained unchanged on average, beauty and HPC were higher while activewear, CE and kitchen had lower prices. Overall, as we get closer to Black Friday/Thanksgiving, promotional activity is expected to intensify once again.

  • There was a better availability of Consumer Electronics SKUs especially at AMZN vs. October 27th, however, out of stocks were more rampant at TGT for the toy basket. There were “higher out of stocks” on October 27th which was likely due to inventory sell through during Prime Day and the rival big sale events.

For the purpose of this analysis we focus on the one consumer category that is most representative of current consumer demand and pricing trends: electronics; this is also the one category where hedonic “deflation” is most prevalent due to the constantly onslaught of new and improved products.

The survey of prices included 38 selected consumer electronics SKUs from AMZN, WMT, TGT and BBY. Overall, Goldman’s survey found that the consumer electronics category was slightly more promotional as of November 10th compared to October 27th, as prices were 2.7% lower than the simple average. However, when considering how prices have changed since the beginning of our study, it is clear that prices are higher since Week 1, having risen an average of 2.9% since October 13th.

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What were the survey’s findings when broken down by retailer?

  • AMZN had listings for 36 of the 38 products surveyed and had prices that were 0.1% lower than the simple average, and 0.7% higher with the price-weighted average. Of the 36 AMZN products surveyed, 29 were sold first-party by AMZN, while the other 7 were sold by third parties on AMZN’s website. Compared to prices as of October 27th, AMZN’s prices were 3.6% lower on simple average as of November 10th.

  • WMT had listings for 28 of the 38 products surveyed and had prices that were 1.4% higher with the simple average, and 1.1% higher than the price-weighted average. Compared to prices as of October 27th, WMT’s prices were 2.4% lower on simple average as of November 10th.

  • TGT had listings for 31 of the 38 products surveyed and had prices that were 1.2% higher than the simple average, and 2.1% higher than the price-weighted average. Compared to prices as of October 27th, TGT’s prices were 4.4% lower on simple average as of November 10th.

  • BBY had listings for 34 of the 38 products surveyed and had prices that were 2.1% lower than the simple average, and 0.8% lower than the price-weighted average. Compared to prices as of October 27th, BBY’s prices were 4.5% lower on simple average as of November 10th.

How about some other product categories like toys?

The Goldman survey of prices included 57 toy SKUs across AMZN, WMT, and TGT. In terms of simple average prices, the toy basket was flat on November 10th as compared to October 27th. When considering how prices have changed since the beginning of our study, it is clear that prices have increased across the board since Week 1, having risen an average of 6.9% since October 13th as of November 10th. This increase is primarily driven by the subsiding of discounts from Target’s Deal Days, Walmart’s Big Save, and Amazon’s Prime Days since Week 1. As we get closer to Thanksgiving / Black Friday, discounts will intensify once again. Out of stocks were also a factor this week. Of their 52 products listed, Walmart had 4, while Amazon had 2. Target had 8 of its 46 listed products out of stock.

And details by retailer:

  • AMZN had listings for 52 of the 57 products surveyed and had prices that were 1.1% lower than the simple average, and 0.8% higher than the price-weighted average. Of the 52 AMZN products surveyed, 39 were sold first-party by AMZN, while the other 13 were sold by third parties on AMZN’s website. Compared to prices as of October 27th, AMZN’s prices were 1.1% lower on simple average as of November 10th.

  • WMT had listings for 52 of the 57 products surveyed and had prices that were 1.5% higher than the simple average, and 1.2% higher than the price-weighted average. Of the 52 WMT products surveyed, 39 were sold first-party by WMT, while the other 13 were sold by third parties on WMT’s website. Compared to prices as of October 27th, WMT’s prices were 2.0% higher on simple average as of November 10th.

  • TGT had listings for 46 of the 57 products surveyed and had prices that were 0.4% lower than the simple average, and 1.5% higher than the price-weighted average. Compared to prices as of October 27th, TGT’s prices were 0.8% lower on simple average as of November 10th.

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Next, we take a look at Kitchenware/Home products. The Goldman survey of prices included 15 Kitchen and Home SKUs across AMZN, WMT, TGT, M, KSS, BBBY, and WSM. Overall, the Kitchen and Home category was slightly more promotional as of November 10th compared to October 27th, as prices were 1.8% lower than the simple average. When considering how prices have changed since the beginning of our study, it is clear that prices have increased slightly since Week 1, having risen an average of 5.1% since October 13th as of November 10th. In this particular basket, out of stocks were not overly significant, as 2 of WMT’s 9, and 1 of AMZN’s 10 listed products were out of stock.

Data by retailer:

  • AMZN had listings for 10 of the 15 products surveyed and had prices that were 2.8% lower than the simple average, and 4.6% lower than the price-weighted average. Of the 10 AMZN products surveyed, 7 were sold first-party by AMZN, while 3 were sold by third parties on AMZN’s website. Compared to prices as of October 27th, AMZN’s prices were 3.1% higher on simple average as of November 10th.

  • WMT had listings for 9 of the 15 products surveyed and had prices that were 5.2% higher than the simple average, and 11.1% higher than the price-weighted average. Of the 9 WMT products surveyed, 2 were sold first-party by WMT, while 7 were sold by third parties on WMT’s website. Compared to prices as of October 27th, WMT’s prices were 0.4% lower on simple average as of November 10th.

  • TGT had listings for 6 of the 15 products surveyed and had prices that were 8.3% lower than the simple average, and 0.4% higher than the price-weighted average. Compared to prices as of October 27th, TGT’s prices were 1.9% lower on simple average as of November 10th.

  • M had listings for 6 of the 15 products surveyed and had prices that were 13.0% higher than the simple average, and 16.8% higher than the price-weighted average. It is notable that 3 Macy’s products listed on October 27th were no longer listed by M as of November 10th, which likely influenced the results of its price comparisons. Compared to prices as of October 27th, M’s prices were 4.2% higher on simple average as of November 10th.

  • KSS had listings for 11 of the 15 products surveyed and had prices that were 4.8% higher than the simple average, and 5.3% higher than the price-weighted average. Compared to prices as of October 27th, KSS’s prices were 13.8% lower on simple average as of November 10th. This price decline is likely driven by KSS having sale prices listed for 9 of their 11 items.

  • BBBY had listings for 10 of the 15 products surveyed and had prices that were 7.2% lower than the simple average, and 5.7% lower than the price-weighted average. Compared to prices as of October 27th, BBBY’s prices were 3.5% lower on simple average as of November 10th.

  • WSM had listings for 6 of the 15 products surveyed and had prices that were 4.7% lower than the simple average, and 3.1% lower compared to the price-weighted average. Compared to prices as of October 27th, WSM’s prices were flat on simple average as of November 10th.

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There are several other categories in the full Goldman survey but a bigger picture emerges: while there is some fluctuation, Amazon continues to be the dominant price leader in online shopping, which means that its biggest competitors WalMart, Target and others will have their work cut out for them if they wish to compete on price as any further discounts from here will leave virtually nothing for profits.

Finally, some thoughts on shipping

As Goldman writes, in retail, several companies have pointed to concerns around higher transportation costs driven by (1) meaningfully higher surcharge rates, (2) higher per-package shipment costs, and (3) a material increase in digital penetration. While the shipping cost issue will be more pronounced during the holidays as the freight market remains capacity constrained, there is also room for freight to remain a headwind into 2021 and beyond as the annual contracts, which have insulated retailers to-date, are likely to renew at an elevated level.

In the past few years, several retailers have offered holiday-special shipping policies. In Week 2 of the pricing study, Goldman began to see shipping related activity pick up, as COST, Staples, West Elm, and WSM all began shipping promotions. During the week of November 8th, we saw several of these promotions continue and several new ones spring up, including Ulta’s offer of free shipping with no minimum threshold and Macy’s $5 discount on same-day delivery.

Via Zerohedge