Problem for Bezos: Mall Becoming Cheaper Than Amazon

[Cincinnatus]

You might think the biggest challenge for Amazon founder Jeff Bezos is figuring out how to make money running a print newspaper, but here is a risk hitting much closer to home: Brick-and-mortar retail stores are becoming cheaper than Amazon

At least one store, that is. Prices at Bed Bath & Beyond were on average 6.5% less than at Amazon for a basket of 30 items chosen by analysts at BB&T for one of their periodic pricing studies comparing the retailers. “We are becoming increasingly concerned Bed Bath & Beyond is sacrificing gross margin in order to drive top-line growth,” BB&T said — that is, increasingly concerned that Bed Bath & Beyond is starting to behave more like Amazon.

One big factor helping Bed Bath & Beyond are the 20% off coupons it regularly sends to its customers. Once you adjust for those, the price gap widens out to 25%.

But even without the coupons, Bed Bath & Beyond is cheaper than Amazon for many items, sometimes considerably so. This shower curtain, for example, is $24.99 at the former and $32.39 at the latter — a 23% difference before any coupons are taken into account.

The price competition is another sign of the multi-front battle between Amazon and the giants of American retail. Some, like Best BuyBBY +13.24%, have introduced price match guarantees promising customers to meet any Amazon price for items in their stores. Others, including Wal-Mart, are putting an increasing focus on their online operations, and using their networks of physical stores as distributed delivery points.

Most importantly, Amazon is gradually losing a price advantage it long enjoyed by not charging state sales taxes. While the company has done deals with a number of state governments to start collecting the taxes — including major markets like California, Texas, New Jersey and Florida — in states where it still does not collect sales tax it enjoys a 5%-10% “pricing advantage,” BB&T wrote.

http://blogs.wsj.com/corporate-intelligence/2013/08/19/a-problem-for-jeff-bezos-the-mall-is-becoming-cheaper-than-amazon/?mod=WSJ_hppMIDDLENexttoWhatsNewsSecond

[Oceander]

The price competition is another sign of the multi-front battle between Amazon and the giants of American retail.

Fantastic!  When retailers compete, the consumer wins.

[DCPatriot]

Fantastic!  When retailers compete, the consumer wins.

How fitting.....

just went to my mailbox.....lo and behold...a flyer inviting me to the neighborhood Safeway's for a "brand new experience!"

"You'll love our newly expanded departments.

100% guaranteed ripe and delicious produce that fresh from the fields...local grown...plus exotic varieties.

oven fresh and irresistible artisan breads, scrumptious desserts.....

and delicious ready-to-serve meals in our deli.


WEGMANS is opening about a mile away......ROFL!!!

Love my WEGMANS!

That Safeway is going to be an empty storefront in two years.

[evadR]

Does anyone believe that there is any store in any mall that can really compete price wise with Amazon??

[DCPatriot]

Does anyone believe that there is any store in any mall that can really compete price wise with Amazon??

Malls are fast-becoming "Outlets".....where storefronts such as Nordstrom's rack and other major brands get rid of merchandise they couldn't move in their brand stores...or merchandise they purchased expressly for the "discount" outlet.

Maybe those are the 'malls' they're thinking of....

[evadR]

"Maybe those are the 'malls' they're thinking of"
That must be it.

[Oceander]

Does anyone believe that there is any store in any mall that can really compete price wise with Amazon??

If Amazon starts having to collect sales tax, that becomes a much closer proposition.  E.g., in the socialist utopia of NY, sales tax is 8.375% - almost 10% - so, for example, a product that costs $100 exclusive of tax, costs $108.38 once the sales tax is tacked on.  Not having to collect sales tax translates into a large margin as far as the consumer is concerned, even if the margin is - initially - the same for each seller.  That, of course, means that consumers will tend to shift their purchases from businesses located in NY to online sellers (Amazon is no longer the perfect example since it is now required to collect NY sales tax).  That, in turn, means that the online seller will be selling a much larger quantity of goods and can therefore make a profit on volume, meaning that the online seller can reduce its pre-unit profit - can reduce the price it charges below the pre-tax cost of the good sold by the seller located in NY and still make the same net profit as that NY-based seller.