Price Perception Index Sheds Light On E-tailer Strategies

1/13/2015
Boomerang Commerce introduced at NRF 2015 the Price Perception Index for digital retail, which measures how retailers optimize prices to attract buyers, compete with other retailers, and build their business on a mix of profit margins and volume.

The first Price Perception Index report finds that Amazon and Walmart are waging a complex competition online.  Amazon undercuts Walmart's prices by 4 percent on the most popular products, while Walmart is following a price matching policy with 63 percent of its products at the same price as Amazon's. Additionally, analysis shows that Amazon has a sophisticated pricing strategy to own a majority of the SKUs for the most popular items and undercut 3rd party resellers on those products.  Third party resellers offer more products in the lower demand product areas.

Other findings in the report include:
  • Retailers split products into three groups (popular or head products, core products, and tail products) and price each of those differently by category
  • Savvy retailers test pricing on popular products well in advance of the holiday season dropping the price by as much as half to measure customer response
  • During the holidays prices rise on tail products, the products consumers tend to add to a purchase such as a phone case or HDMI cables
  • Amazon's shipped and sold products are generally 2.5 percent less than the same products at Walmart while Amazon third party sellers, offer those same products for 9.7 percent more than Walmart
  • While Walmart price matches Amazon on 63 percent of the items, Amazon is able to drive lower prices on the most popular products and obtain a much lower overall PPI (-2.5 percent vs. +0.49 percent)
  • PPI by category can vary greatly and each retailer optimizes prices in the categories where it excels e.g. Amazon focuses on Home Audio vs. Walmart focuses of Auto.
"Competitive pricing has moved beyond weekly adjustments and price matching," said Guru Hariharan, founder Boomerang Commerce. "The PPI sheds light on the complexity and the speed at which retailers adjust their pricing to drive buyers and revenue."

Boomerang Commerce was recognized by the National Retail Federation and chosen as one of the top two Digital Commerce Startups of the year at this year's show.
X
This ad will auto-close in 10 seconds