The Next Big 12 Volt Discounter Beyond Amazon

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Amazon boxes

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.

 

 

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4 Comments

  1. Its past the race to 0 its cheaper for me to buy off amazon then shop at my local distributor for one higher priced radio. I could have bought it online and had it in 2 days free shipping, or did my drive of 90 miles round trip to go pick it up that day.
    I supported my distributor and paid more then had to turn around and sell it to my customer at my cost, because he knew what it cost off amazon. I made no markup on a product 15 to 20 years ago had 30 to 40 points return on investment.
    If manufacturers don’t start doing somthing, they will be doomed also.
    Because trained installers will and have been looking for other jobs that pay better. Installers have been leaving the field in droves in the last few years. Why stay in a job that has no feature?
    We are taking heat from every angle the auto makers, wholesale slaughter of profits and manufacturers not providing warranty they used to provide or support.
    this isn’t just the radio, its the kit parts and wire harness. the only thing not included is the installer but they are working on that too.
    I’m not buying insurance driving 50 miles one way to install a radio for 35 bucks. or whatever they offer for installations now with a prepaid install, my time gas and wear and tear on my car eats all the profits then I turn around and have to pay income tax on that money, by the time I make anything I’m eating ramen noodles. 3 of 7 days a week when I have money to buy them.
    I didn’t work 37 years in the industry to live like that. And I’m sure no one else did either.
    But this is what the industry is becoming.

  2. Perfect! Now Brands that are already participating in the “Race to Zero”
    have new allies (Amzn, WM and SE), in the battle for ‘Race to Sub-zero.’
    Brands that have high-visibility on the Web, now represent a real threat
    to the credibility and sustainability of every 12V Specialty retailers absolute
    “most important brand” (their OWN store and its core value-proposition).

    So it’s now more urgent than ever that upscale 12V Retailers ‘shift gears’
    to focus on brands that are not supporting this insanity and the notion that
    selling w/o regard for where the goods go, and at whatever ‘Internet price,’
    is somehow acceptable…

    There are more profitable, better performing options to be found and sold, and
    it should be apparent that it’s now no longer an option to just ‘clerk brands’ that
    have made it obvious they are simply NO longer concerned with your business
    (or even your survival).

    There is a fundamental need to employ ‘a balance between planning and action’…

  3. Ridiculous to see retailers like Freemans having to police the internet wasting valuable time and resources to do something the vendors should already be aware of!

  4. The race to zero is just around the corner, but what’s going to happen when we get there?

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