Buyers beware: Walmart is getting more aggressive on price wars
The online retail giant Walmart is taking another step in its push to drive down prices for its own inventory, expanding its price wars in a way that threatens to drive out some of its biggest competitors.
Walmart is using a tactic called price matching, in which it matches competitors’ prices for the same item, to lower prices for a product it is selling for less.
This strategy is not new, but Walmart has pushed it to the extreme in recent years, often in tandem with a broader price war.
It also has become more aggressive with this tactic in recent months, according to people familiar with the matter.
Walmart is now paying the price for its price-matching strategy.
“We’re starting to see the price-related behavior being a bigger issue in our industry,” said Steve Ellis, an analyst at Sanford C. Bernstein.
Walton, a unit of Wal-Mart Stores Inc., said the price matching strategy, which it began using in 2017, would cost it $1.7 billion to $2.5 billion annually by 2023, and that it would cost $8.4 billion to close its price war with Amazon.
The company also said the cost of the price war would be “incredibly high” and that the cost could rise further.
Wal-Mart also said it would spend $50 million to $100 million on price matching with its own suppliers this year, and would spend another $50 to $200 million in 2020 and 2021.
This year, it has already spent $1 billion on price-matched products.
The company’s decision to launch price matching in the United States comes as other online retailers have expanded their price wars, particularly Amazon, which has expanded its price match program to include AmazonFresh.
Walmart said its price matching program was one of several new initiatives it was implementing in its retail stores.
“Walmart has long been one of the leading innovators in price matching,” a Walmart spokeswoman said in a statement.
“The company is committed to price matching and will continue to make investments to keep pace with the market.”
Walmart is already the biggest seller of online merchandise in the U.S. and it has been pushing prices for several years.
It has tried to take a different tack this year by announcing a new program to price match its merchandise.
The move to price-matches, and its price competition with Amazon, will make it harder for Amazon to maintain its lead over Walmart in the e-commerce market.
Wal-mart said it expects to spend $8 billion this year on price matches and that those costs will rise to $16 billion by 2028.
Amazon has increased its price matches to more than $2 billion annually.
The decision to price matched prices could also hurt Amazon’s e-Commerce business.
The AmazonFresh program has already driven Amazon sales down from $23.3 billion in 2020 to $17.5 a year ago, according the firm’s third-quarter earnings report released Friday.
Walmart, by contrast, is expected to grow its e- commerce sales by about 25 percent this year and to double its e‑commerce sales by 2026, according an estimate by the research firm FactSet.
The e-marketplaces that sell items for AmazonFresh are also likely to see revenue declines from the pricing war, as the online retailer tries to compete with the online marketplace.
In a separate statement, Walmart said it will also focus on its online store to improve its service and improve its customer service, and it will expand its retail-only stores to support this strategy.
WalMart is also testing a pricing strategy in the grocery industry that it hopes will help it drive down the prices of its grocery products.
In recent years Walmart has launched price matching campaigns in grocery stores and restaurants, with its prices often going down on items that were previously priced competitively.
The retailer said this year that it was experimenting with similar price matching strategies in grocery retailing.
The Walmart price-fighting strategy is also threatening to drive away some of the top competitors in the online shopping space.
Amazon is one of many retailers that has been targeting Walmart and other online rivals with price matching.
It recently started a $1,000 price match to help push back against Walmart price increases.
Walmart has also begun using price matching to lower its prices for Amazon, with Walmart’s price war costing it $7 billion last year.
Walter Block, an economist at the Peterson Institute for International Economics, said that Walmart’s aggressive price war tactics, coupled with its other price war strategies, would likely drive some of Amazon’s rivals out of the market.
He said that Amazon’s pricing wars could be damaging for the broader online retailing industry.
“The online retailer may not have much of a chance of keeping its own prices competitive against Walmart’s,” Block said.