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Why the Consumer Wins When Walmart and Amazon Battle Over Prices

from The Daily Bell:

Walmart and Amazon have surely benefited from government protectionism, but the economy is still free enough to promote competition which ends up benefiting consumers.

Back in 2011 Walmart invested in pricing tools, realizing that Amazon was doing better. Amazon has algorithms which search the internet for the lowest prices, and then set their products to that price. Generally even when the lowest price is for wholesale ($10 for a pack of ten) Amazon will set their price that low even for a single pack of the product ($1 for a pack).

In 2012, the battle between Amazon and Walmart raged over a video game around Christmastime. The price was set around $50 for each retailer, but as a few cents here and there we dropped from the price to gain a tiny edge over competitors, the price of the video game eventually dropped as low as $15.

So that means people were not being overcharged for a game, and it means the companies were not making “obscene” profits on the product. The market corrected the negative aspects of business that would not have been corrected if there was a true monopoly.

Now, the war of prices is a seasoned game of strategy which brings suppliers into the mix. Both Walmart and Amazon reportedly hound product supply companies to lower their prices in order to better compete.

Sometimes, Walmart even encourages suppliers to reorganize their companies so that they can still turn a profit while charging Walmart less. Another tactic employed is to threaten to make their own products which would directly compete with the supplier’s.

Amazon seems to keep their suppliers guessing, using a tactic that The 48 Laws of Power suggests to make sure your opponents cannot entirely gauge your real intentions.

Read More @ TheDailyBell.com

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