nline retailer has launched its services in Australia. According to research from Nielsen, three out of four Australians say they are “interested” in Amazon Australia and 56 per cent say they will buy when it launches. Leading retailers all over the world have seen their businesses compromised for not being able to keep up with the rapid changes in shopping habits and the expectations that online and marketplaces have raised for shoppers. Friend or foe, with its revolutionary logistics, data driven platform and its competitive prices, Amazon has already had significant influence on Australian shoppers. How much of Amazon’s success is attributable to a highly competitive pricing strategy? Much has been made in the media about the need to “match prices” versus Amazon. In its first week, how did Amazon compare with the other large retailers across online or traditional stores? According to recent data from Invigor Group, we selected a basket of 561 “power products” across consumer electronics and home appliances categories and compared Amazon AU prices with leading retailers’ in the Australian market such as David Jones, Harvey Norman, Myer, JB Hi-Fi or Officeworks among others on an intraday basis.   Among 506 consumer electronics and household products analysed, Invigor found that Amazon offered the most competitive price in 23 per cent of the products, more than any other retailer. For example Harvey Norman offers the most competitive price in 16 per cent of products, JB HI FI in 16 per cent and Appliances Online in 3.5 per cent of products. In contrast, the research shows that in 22 per cent of products Amazon sellers were the most expensive option compared to the rest of the retailers such as JB Hi-Fi (9 per cent of products are the most expensive), Harvey Norman and Appliances Online (13 per cent of products are the most expensive). We also found that there were 65 products offered through Amazon that were not offered by any of the leading retailers in Australia either online or in store, meaning that Amazon’s range is potentially 11 per cent wider in this category. Unsurprisingly, department and variety stores like David Jones, Myer, Big W, Kmart and even Officeworks had very few products where they were the most competitive on price in the consumer electronics and household appliances categories. On average these stores are 44 per cent more expensive than the least expensive retailer across all products in the analysis. When Amazon is the least expensive, the average price difference versus the most expensive retailer for each product is 35 per cent and in some cases, products were priced double or even triple the lowest priced competitor. This was typically found on lower priced items like headphones and accessories less than $20 purchase price. In contrast, when Amazon is the most expensive the average price difference versus other CE and Household product retailers is higher at 38 per cent. Leading retailers are picking their battlegrounds when it comes to competitive pricing strategies. Being competitive on price differs not only by product but also by category. JB Hi-Fi offer the most competitive prices on average on categories such as in-car accessories, radios and headphones. While Harvey Norman dominate lower average prices in categories such as TV’s, Bluetooth speakers or compact cameras. Harris Technology offer on average lower prices in categories such as home phones or sync cables. According to the categories analysed, Amazon offers the most competitive prices in categories such as ‘Ink and toners’, where out of the 59 products analysed, Amazon shows better prices for 21 of them as well as for ‘Micro SD cards’ category. Contrary to this, there are certain categories where retailers win the price war with Amazon. Categories like ‘Toasters’, where out of the 16 products compared, 14 retailers show cheaper prices than Amazon. Same scenario for ‘Soundbar’ category, where out of 10 products, nine get better prices in retailer stores. In the ‘Sandwich press’ category, out of the 10 products, retailers have the best deals in eight of them. For some other categories like ‘PC accessories’ prices are quite balanced and there are not significant price differences between Amazon and other retailers. Re-price, match or hold? Building a winning pricing strategy Having an opponent like Amazon as a competitor makes the retail wars even more challenging and (hopefully) the result is everyone lifts their game and the consumer is the winner. As in every war, a good strategy is essential to have some chance at winning. Building a pricing strategy definitely involves monitoring and understanding competitor pricing and promotional strategies as well as your own. The decision to reprice such as to price match, increase price (and margin) or reduce price on key products or categories is dependent on any number of things including product margin, price elasticity, inventory levels & locations, merchandise strategies, competitor’s pricing & promotions, brand positioning and consumer behaviour. Irrespective of whether competitors like Amazon are cheaper, the fundamental first step is to review and have in place both a proactive and responsive pricing strategy. This will guide decision making about whether your business ends up matching, increasing or decreasing pricing or introducing promotional and other strategies. Some retailers may choose to compete on price on key power items that are traffic drivers (the old milk loss leader in the back of the store strategy) or basket drivers but remain higher on everything else. In summary, the key is knowing your customers, monitoring competitive behaviour then being able to respond quickly based on your own pricing strategy and within the context of your own likely sales impact (price elasticity). In many cases, retailers are missing out on an opportunity to increase prices when their competitors suddenly go off promotion or reprice upwards as equally as they may choose to price match or reduce prices. The impact of this decision could be significant to the bottom line. Friend or enemy or both, Amazon is a catalyst for Australian retailers to re-assess many aspects of their offer including price and promotional strategies. With a winning pricing strategy in place, it becomes critical to monitor the impact of both your own and competitor price decisions on demand, profit and brand perception and how this might influence the long-term outlook for growth. Influencer factors for a Winning Pricing Strategy There are some factors that are reshaping retail industry that need to be considered in order to develop effective policies to manage different prices and promotions across channels, including these: Cross-channel customer decision journeys Today most shoppers are often starting online even for in-store purchases. For example, according to McKinsey Global Institute, 50 per cent to 70 per cent of shoppers are checking prices on their mobile phones in physical stores, depending on the category Relevant Engagement and Personalisation Shoppers are increasingly expecting more relevant communication including personalised product recommendations and promotions based on shopper profile, loyalty, promiscuity and past behaviour. According to different surveys based on new shopping behaviour, the capability of delivering personalised prices to shoppers will increase significantly in the next three years. Price transparency and Dynamic pricing Thanks to the internet, customers have at their disposal price comparison engines that enable them to know the price of different items in different retailers in real-time. Retailers also can find technology solutions to monitor competitors and automatically manage prices across multiple channels and marketplaces, being able to reprice top-selling items several times per day. The role of retail technology in the pricing strategy In the last few years a steady stream of advances has emerged in pricing capability such as analytics and decision-support tools. These tools aim to provide effective processes and systems to manage price relationships between their own item prices and competitor’s prices. The popularity of these solutions has increased recently among leading retailers to remain competitive against new players such as Amazon. One of the main benefits of these new competitive pricing intelligence tools is the possibility to develop a dynamic pricing strategy that allow retailers to increase profit margin significantly, make better pricing decisions and the ability to respond to competitors’ price changes. According to McKinsey, the implementation of these kinds of technologies enable retailers to go after potential new margin increases of up to 60 per cent – a figure to take into consideration in today´s market, where new players with a strong technology capacity like Amazon come into play.