Brands: Here’s Your Ammunition Against the Online Price Wars

Brands: Here’s Your Ammunition Against the Online Price Wars

In March, this piece in Recode about the price war between Amazon and Walmart caught our eye. This quote in particular cuts right to the pain point that many brands and sellers are still feeling right now:

 

“The result [of the price wars] has been a high-stakes race to the bottom between Walmart and Amazon that seems great for shoppers, but has consumer packaged goods brands feeling the pressure.”

 

This aptly named “race to the bottom” puts most brands in an untenable position. Walmart was already aggressive when it came to discounting. Now: we have Amazon to contend with, or, more specifically, it's fast, responsive, and powerful pricing algorithm. The software scans the web for the lowest price per unit, even if that price is a part of a bulk-pack (at a discount warehouse seller like Costco) and uniformly assigns that price to every similar good on Amazon. Other retailers see the price move and respond, and then the race to the bottom begins. Of course, as with any race to any bottom: brands and sellers are always losers.

 

You Know the Problem. Where are the Solutions?

Brands collectively have the same problem, and it’s easy to identify but difficult to solve. They know that prices are moving, but can’t identify the “when” and “who” part of the equation in terms of who did it first. (You know this problem and you know it well, right?)

Where brands and retailers can deploy teams to monitor in-store prices, it’s impractical to leverage human-based efforts to monitor online pricing effectively. In some cases though, brands are discovering that this is what their National Account Managers are doing, over pure frustration related to their online retail customers.

But the single most, scalable, and efficient solution is an automated, technology-driven one. Brands need data management tools that provide fast, cost-effective monitoring around price changes. We’ve heard from many of the biggest brands that timely and indisputable evidence would support their discussions with retailers on price changes.

first-mover-magnified.pngSo: we just went ahead and built it. Our First Mover Report is straightforward in both design and execution. You tell us which products to monitor and on which retail sites (you can select up to five), and we notify you as soon as the price moves, by how much, and who moved first. We think that, at very least, sellers deserve a level playing field. Our hope: data-driven evidence will lead to productive, cooperative conversations with retailers about core brand values and customer loyalty.

 

 

A Quick Aside: Cheap isn’t Always Better

There are examples (especially, and maybe most successfully, Target) of discount retailers who do more than merely compete on price. Customers now, and have always, developed relationships with both brands and stores based on their core experiences with both. Back to the Target example: there’s smart evidence that shows their post-recession return to reverting to their signature “cheap chic” strategy is working, and working well. During a year when other retailers are struggling, the big box store (with notable recent partnerships from lifestyle brands like Dwell) posted respectable second-quarter earnings and saw a nice jump in their share price.

The lesson? Experience, quality, and innovation are ultimately what drives customers back to the counter or the cart. That doesn’t mean that steep discounting, or the online price wars, will stop anytime soon. For now: brands need to arm themselves with data and documentation that does the fighting for them.

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