Amazon and Walmart are at War over Prices and it is Terrifying CPG Brands

Discussion in 'HardForum Tech News' started by cageymaru, Mar 31, 2017.

  1. cageymaru

    cageymaru [H]ard as it Gets

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    Some of America's biggest Consumer Packaged Goods or CPG brands are terrified of the price war that Amazon and Walmart are waging against each other. Both Amazon and Walmart are asking CPG companies to lower prices anyway that they can even if it means cutting marketing budgets. Walmart wants to have the lowest prices on 80% of the products they sell. Even if Amazon is selling a product for a loss, Walmart wants to be able to sell it for the same price, but at a profit. So they are putting extreme pressure on brands that sell in their stores to lower their prices because Amazon has taken a new approach with an algorithm.

    Amazon's new algorithm is taking the bulk pricing at Costco for example, and applying it to single item sales. Naturally this is creating a rise in shipping costs and cutting profitability. In exchange for making their products more eCommerce friendly, Amazon is selling CPG companies premium advertising spaces on their Amazon store. This would include creating products that can be shipped affordably and make a profit. Some companies are going the extra mile like Green Works that took their household cleaning products and re-imagined them into a concentrate form. When you order some of their products, you get a concentrate version of the cleaner, instructions on how much water to mix it with, and a bottle to contain the mixture.

    Another re-imagining of a product would be the packaging. Typically In a retail store, a product's packaging needs to be large to attract sales, and sturdy to deter thieves. Companies now are making their packaging smaller and lighter to become "frustration free" as Amazon has been doing for years. Again Amazon is rewarding those companies that comply with premium advertising space in exchange for making the cost of shipping less.

    In the end consumers win, but are we ready to purchase powdered soft drinks to cut down on shipping costs? I was wondering why The Clorox Company announced Clorox Bleach Crystals and now I see why. It is amazing to see how Amazon has revolutionized eCommerce in the same manner that bulk packaging revolutionized B&M stores decades ago.

    “Once every three or four years, Walmart tells you to take the money you’re spending on [marketing] initiatives and invest it in lower prices,” said Jason Goldberg, the head of the commerce practice at SapientRazorfish, a digital agency that works with large brands and retailers. “They sweep all the chips off the table and drill you down on price.”

    But this time around, Walmart’s renewed focus on its “Everyday Low Price” promise coincides with Amazon’s increased aggressiveness in its own pricing of the packaged goods that are found on supermarket shelves and are core to Walmart’s success, industry executives and consultants say. The result in recent months 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.
     
  2. Jim Kim

    Jim Kim 2[H]4U

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    I don't see this being a win for consumers in the long run, but what do i know.

    Ingredients Inside: Clorox® Control Bleach Crystals™
    Sodium Chloride; Sodium chloride is also known as table salt and rock salt. It is commonly used in detergents, hand dish soaps, liquid laundry soaps and fabric softeners to thicken and stabilize formulas.
    Sodium Dichloroisocyanurate; Sodium dichloroisocyanurate is an organic compound that releases halogen bleach upon dissolution in water. It can be used as bleaching agents in products such as toilet bowl cleaners.
     
  3. Shipping big huge bottles of mostly water expensive...who'd a thunk it. </sarcasm>
     
  4. raz-0

    raz-0 [H]ardness Supreme

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    On initial inspection, I declare Amazon slightly less stupid than walmart. There have been retailers that have tried the "For that category, you have the choice of the house branded generic version or go fuck yourself, which will it be?" It has historically been a bad spot to wind up.
     
  5. Garniplasky

    Garniplasky n00b

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    This Jason Goldberg has made his gefilte fish proud. Oy gevult.
     
  6. RogueTadhg

    RogueTadhg [H]ard|Gawd

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    Not really a big win. What will happen is products being water-ed down, added fluff, or packaging that has "More" but actually less for the money.
     
  7. Showbiz

    Showbiz Gawd

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    A race to the bottom isn't a win for anybody. Eventually labor is going to be cut as well as it become the most expensive component (if it's not already) of any product, and when that gets cut, who's going to have any money buy this shit?
     
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  8. CaptNumbNutz

    CaptNumbNutz Bulls[H]it Master

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    Wal-Mart has been doing this for decades, at least since Walton died. It's been long theorized that many companies that sell in wal-mart actually have separate production lines just for Wal-Mart shelves.
     
  9. thenapalm

    thenapalm Limp Gawd

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    This sounds a lot like the proven process to shut down domestic manufacturing and off-shoring production. Sure it will result in lower consumer prices but someone in the middle is going to get squeezed out and the economic results may not be pretty.
     
  10. oROEchimaru

    oROEchimaru [H]ardness Supreme

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    Dear amazon, stop selling fake, knockoff and dangerous fire hazard products thanks!
     
  11. brentsg

    brentsg [H]ard|Gawd

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    My wife used to work for a brand that made high-end outdoor supplies for camping and such. Anything they had that Wal-mart sold just got beaten into the dirt to slash prices. No win here for consumers..
     
  12. SonicTron

    SonicTron Snopes is My Fact Checker

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    So like when manufacturers stopped making half-gallon Ice Cream and started making them 1.75qt, then 1.5qt, and now some 1.25qt all at the same or higher price points
     
  13. RogueTadhg

    RogueTadhg [H]ard|Gawd

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    It's not a theory. I've known someone who works in a factory producing goods that do have just this - a "Generic" line for walmart and other stores. Same brand without the fancy box.
     
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  14. DuronBurgerMan

    DuronBurgerMan [H]ard|Gawd

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    And people wonder why quality in f*cking everything has gone to pot.
     
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  15. You guys didn't read the article. Providing concentrate produces the same quality because you aren't paying for shipping water which you can add at home.

    But I agree with you that walmart's purchasing power has put pressure on manufacturers. Often they will do drastic things like make the cord shorter on a product by a foot and with 1 AWG gauge smaller so they can save a couple cents. Or they won't include extras like a parts bag or case for tools purchased.
     
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  16. Mut1ny

    Mut1ny [H]ard|Gawd

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    Go pick up a bottle of Great Value pasta sauce and a bottle of Ragu pasta sauce and look at how similar they are. I think that if Wal-mart can't get companies to make their own products cheaper they just make them put their store brand label on it. Viola!

    Wal-mart is very aggressive and very "do as we want or we'll find someone that can". I use to watch a lot of that Sharktank show and Wal-mart was a BIG deal. But that's exactly it, you either fold to their will or they'll stop selling your shit to millions of people and find another brand/company that will do what they want.
     
  17. nutzo

    nutzo [H]ardness Supreme

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    Actual this is called competition, and the consumer always comes out ahead, unless all the competitors go out of business and we end up with a monopoly.
     
  18. Spire3660

    Spire3660 [H]ard|Gawd

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    stop buying from third party resellers......i only buy from 'ships and sold by amazon'
     
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  19. DuronBurgerMan

    DuronBurgerMan [H]ard|Gawd

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    I read the article, sir, so I don't know why you went there, as the article talks about general intense pricing pressure too.
     
  20. Killdozer

    Killdozer [H]ard|Gawd

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    I'm of the opinion that a race to the bottom turns out poorly for everyone.

    Seems like there are others that agree.
     
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  21. hardboner

    hardboner Limp Gawd

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    nah. Everything should be sold at cost. Consumer wins.

    seriously, There are some products that have not changed or improved for the last few decades. No reason why they can't cut profit margins for those.

    Look how expensive Tide detergent is. They're gouging customers to appease shareholders. It only turns out poorly for customers because they're the ones overpaying
     
  22. nutzo

    nutzo [H]ardness Supreme

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    Then don't buy garbage, no mater how cheap it is.

    I look at both quality and price, and I buy what makes sense for me.
    Sometimes I just need something cheap, maybe for a 1 time use, so the lowest price wins.
    Other times I'm buying something I plan to use for years, so quality and reliability is more important.

    I have a relative in construction who always recommends expensive power tools.
    As a home owner, I usually ignore that advice and buy lower cost tools.
    Many of these lower cost tools are still working fine 20 years later, since I only use them a couple times a year.
    The expensive high quality tools may make sense if you use them every day, but for once every 6 months, they are a waste of money.
     
  23. Dead Parrot

    Dead Parrot 2[H]4U

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    Tide is expensive to cover the cost of all that advertising. When was the last time you saw a TV ad for Great Value detergent? The sad thing is that is mostly wasted money. Tide ads viewed by folks already using Tide are wasted. Ads view by someone fully decided on a different brand are also wasted. Only the few undecideds are the ones where the ads might create a new customer. Which is WalMart's point by asking 'Name Brands' to spend less on advertising and just lower prices.

    But your point about shareholders IS the reason why they keep dumping massive loads of money into advertising. To get that next .01% of market share. Otherwise, shareholders see shrinking market share and the stock price plummets.
     
  24. ymer

    ymer Limp Gawd

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    Amazon is monopolizing internet sales, it's very very concerning.
     
  25. Crosshairs

    Crosshairs Administrator Staff Member

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    In 9 years of buying from Amazon, I have never bought or received any fake, knockoff or dangerous fire hazard products.
     
  26. Mr34727

    Mr34727 2[H]4U

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    With respect, I don't think you understand the concept of a monopoly. Amazon might have a big portion of the eReader market, but "internet sales" is a channel, not a product. They haven't put up any barriers to entry that hinder competition. Jet, eBay, Alibaba, etc can all equally compete for a customer's dollar, with no significant barrier to getting another customer than Amazon itself would have.

    A monopoly for Amazon would be like Amazon buying the Siri and Google Home patents, or buying UPS and Fedex- two scenarios that would give significant barrier to entry for others in the market. The first would be considered horizontal monopolization and the second would be vertical monopolization.
     
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  27. DuronBurgerMan

    DuronBurgerMan [H]ard|Gawd

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    Didn't say I buy this sh*t. Folks are reading an awful lot into a general observation. All that being said, the competition to appease Wal Mart and other big box retailers (and Amazon) on price *has* driven down quality on brands and product lines you wouldn't otherwise expect. And that's probably because while you and I may appreciate quality, or at least weigh quality into a purchase calculation, most people just buy the cheapest sh*t they can find. The result is having to sift through ever-growing piles of sh*t products to find decent grade stuff. And it sucks if you ever guess wrong. I did on this damned GE fridge. Good reviews, premium price... still sh*tty quality. But that's a story for another time.

    Or the reverse.... if you've ever talked to an auto mechanic, he might tell you Snap-on tools are great quality, and most everything else sucks. But they sure sell their souls for Snap-on, let me tell you.
     
  28. DuronBurgerMan

    DuronBurgerMan [H]ard|Gawd

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    Amazon doesn't have even close to a monopoly on Internet sales. They are the biggest game in town, maybe... but I mean consider our industry. PC Parts. Amazon has plenty of competition. Newegg is sure huge. Think of another industry. Clothes. Big Box department store websites are going to be big competitors there. On movies, Amazon prime must compete with Netflix and Hulu. Consider books -- which is the closest thing Amazon has to a monopoly. Barnes & Noble is still around, and plenty of other smaller retailers.

    No, Amazon may be the big boy, but they aren't even close to a monopoly.
     
  29. Wrecked Em

    Wrecked Em [H]ardness Supreme

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    It's funny because companies like proctor and gamble spend tons of money to develop powered soap so they wouldn't have to ship mostly water. They only learned later that consumers would actually pay substantially more for liquid soap, and they did a complete 180. Now it seems like they're coming back full circle.
     
  30. Zohar78

    Zohar78 [H]ard|Gawd

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    More than likely, These same people wont buy higher quality stuff to begin with.. seems with most things, the higher quality item is out there, but is the consumer willing to pay? the poster about the drills really puts things basically in perspective.
     
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  31. viscountalpha

    viscountalpha 2[H]4U

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    All about the ROI man. What you stated makes perfect sense.
     
  32. Nashligo

    Nashligo n00b

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    HardOCP is becoming the tl;dr site with these book reports.
     
  33. GoldenTiger

    GoldenTiger [H]ard as it Gets

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    It's not very long.