Market Overview

Would You Take a Bribe From Amazon to Leave a Store Empty-Handed?

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The nation's largest online retailer is offering consumers the chance to compare prices and walk away $5 richer.

Now before you scoff and say, “I don't need five bucks,” just remember that most consumers will go out of their way to save $0.50 on a 12-pack of Coke (NYSE: KO) or $2 on a package of toilet paper. It's the way of the world: humans love to save. And if we can get something for virtually nothing, we will jump at the chance.

This is where Amazon's (NASDAQ: AMZN) newest venture could really shine. According to AllThingsD, the promotion will go live this Saturday. Amazon's own site provides the following breakdown:

Get extra savings on December 10
– Get a 5% discount (up to $5) on select items in electronics, toys, sports, music, and DVDs just by checking a price. Redeem this offer up to (3) times – a savings of up to $15.
Check prices instantly: Scan It, Snap It, Say It or Type It
– Use barcode scanning, camera, speech or text search to find the lowest prices from Amazon.com and our merchants.
Share in-store prices
– With every in-store price you share, you help ensure our prices remain competitive for our customers.

The app can be downloaded directly from the App Store, the Android Market, or from Amazon.com (Android version only).

Amazon's product strategy is quite brilliant here. First, the company is enticing consumers with a fairly decent amount of saving, especially for those who take advantage of the offer on more than one occasion. Second, the company is reinforcing its own brand by convincing shoppers to check their Amazon app every time they visit Target (NYSE: TGT), Wal-Mart (NYSE: WMT) or Best Buy (NYSE: BBY). Third, the company is sneaky in its attempt to get consumers to spread the word that Amazon has superior prices. Oh sure – we may occasionally find a better deal in-store. I've encountered that once or twice myself. But that's a rarity.

Typically, if I'm buying in-store, it's because the product is either one that I want to see and touch and have the option to return in person without hassle (hence my reason for going to Best Buy), or because I want the item quickly and do not want to wait for it to be shipped. In both cases, I am not willing to pay more than what Amazon is charging. But if Target or Best Buy or any other retailer has the same price, there is no reason why I wouldn't go there instead.

Amazon is well aware of this danger. However, the company also knows that it can typically beat brick-and-mortar retailers by a sizeable amount. I have found that when it comes to DVDs, it isn't always easy – or even feasible – to save $10 or even $5 after the first week of release. You could scour the sales papers, check online frequently, and still fail to catch a deal. But Amazon tends to extend the savings for several months, and by the time Target has the latest season of The Middle on sale again, consumers could have already ordered it from Amazon.

Considering that DVDs (along with toys, sports, music and electronics) are one of the products that Amazon is pushing with this 5% discount, consumers could have the opportunity to save an even greater amount.

Right now, more and more consumers are turning to online retailers for their movie and music needs. Whether they download, stream, or purchase a physical item, consumers prefer the ease, convenience and cost savings of going online. By introducing this special deal now, Amazon is going to further train us – and by “us” I mean all consumers – to continue shopping online.

Where does this leave the competition? Target and Best Buy should follow up with similar apps of their own, and perhaps raise their discounts to 6% or 7%. That might not be a huge increase, but it's essential to consumers.

In fact, brick-and-mortar retailers could start building apps that, when used to check the price of an item available from an online retailer, could automatically pull up a coupon for consumers who choose to buy it in-store. And to be sure that consumers don't ignore the coupon in favor of shopping online, these same retailers could offer a redirect to their websites and allow consumers to use the coupons online as well.

ACTION ITEMS:

Bullish:

Amazon's latest deal sounds like a win-win for both the company and consumers. If you agree, consider the following:

  • Amazon is the obvious corporate winner in this scenario.
  • But toy manufacturers like Hasbro (NASDAQ: HAS) and Mattel (NASDAQ: MAT) could benefit from parents who buy additional toys for Christmas because, after the discount (not just the 5% deal but all of the deals that Amazon offers), they can afford to buy more.

Bearish:

Think the Amazon deal is nothing more than a silly gimmick designed to deter consumers from shopping elsewhere? Then consider these alternatives:

  • Target, Best Buy and Wal-Mart are still big sellers of electronics, music and DVDs. Wal-Mart is also one of the nation's largest toy retailers.
  • Dick's Sporting Goods (NYSE: DKS) is one of the bigger retailer of sports items competing with Amazon.

Follow me @LouisBedigian

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

 

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