Unless you were visiting Antartica this weekend, you know that Amazon and Walmart are in a battle for retail dominance, and the latest battle is being fought in the $800 billion grocery market, with Amazon’s purchasing Whole Foods.
But Amazon and Walmart are competing more fiercely in just about every other category of retail sales, including the humble car audio space. In fact, Walmart.com has emerged as the new home for many car stereo discounters who have been burned by Amazon’s high commission fees for Marketplace vendors.
On January 1st of this year, Amazon raised its commission fees to 12-15 percent, up from 8 percent earlier, sending car audio Marketplace vendors reeling.
Walmart.com charges a slightly lower fee of 12 percent for car stereo vendors, said AudioSavings.com, an online seller. So many discounters set up shop on Walmart.com as well as Amazon. Car stereo discounting on Walmart.com’s marketplace has tripled in volume this year over last, estimates AudioSavings.com.
David Wall of Freeman’s Car Stereo, a leading Charlotte, NC chain, checks online prices regularly and reports unauthorized discounts to its vendors. He said he’s seen about a doubling in the discounting activity on Walmart.com in car audio.
Others agree that discounting on Walmart.com has taken off. But car stereo, is just one small category caught in a greater war between Amazon and Walmart that may change the face of retail.
“Walmart.com is responding to Amazon and trying to take business away,” said one industry executive. “They go to battle…If Walmart is carrying the product directly and Amazon is carrying it, they will go at it tooth and nail, dropping the price below cost. They are just looking to deny each other the business. Yes it affects head unit and speakers and not just that.”
A chief culprit driving prices down is an Amazon algorithm. It automatically sweeps the Internet to find the lowest price and then match it. But it doesn’t distinguish between Costco selling a ten-pack of potato chips or another retailer selling single packs. If 10 bags of potato chips cost $10 it will calculate the price at $1 a bag and reset Amazon prices accordingly, said Recode. (This is particularly damaging as Costco makes no money on the products it sells; it takes its profits on membership fees).
Recode says, “In some instances, Amazon is willing to lose money for some period of time on a product it feels it has to have.”
On Walmart.com as of Monday, the lowest price we found for a car radio was $14.99 vs $14.97 on Amazon.
So Walmart, seeing Amazon selling product at cost, goes to its suppliers and demands lower wholesale costs so it can better compete. Manufacturers then watch their profits dwindle. Retail goods of all kinds are feeling the sting, said Recode.
So some manufacturers are laying the groundwork to bypass retail, where their goods are subject to price wars. Unilever, the owner of brands like Dove and Hellmann’s, last year purchased the subscription razor service Dollar Shave Club for $1 billion, so it can sell directly to consumers.
More manufacturers are expected to seek out direct-to-consumers businesses to purchase.
Most analysts say Amazon purchased Whole Foods to compete with Walmart in groceries. But all products, including car audio, look to be caught in the crossfire of an Amazon-Walmart battle.