Several times during the past year a retail analyst has loaded up a shopping cart with coffee makers, bath towels, linens and other items from Bed Bath and Beyond and compared prices for the same products with Amazon.com.
Amazon prices were usually about nine percent lower, but for the first time, Amazon’s prices are not cheaper.
“Bed Bath and Beyond’s prices are about 6.5 percent lower than Amazon and what’s quite interesting is the store has ubiquitous 20 percent off coupons, but they were cheaper even without factoring in the coupon,” says Anthony Chukumba, the equity analyst who oversaw the latest analysis for BB&T Capital Markets.
One of the 30 items in the analysis is a Bormioli Rocco Misura carafe, which retails for $4.99 at Bed Bath and Beyond, and was listed as $16.61 on Amazon.
When I checked the price late Wednesday, Amazon now has that same carafe in stock for $6.95. Amazon has not responded to a request for comments about this retail analysis.
Traditional store chains have gotten more competitive with Amazon because they see the threat the online retailer poses.
“We have seen a number of brick-and-mortar retailers who are bringing their prices down because at the end of the day, if you’re not competitive, you’re not relative,” Chukumba says.
“Lower prices generally mean lower gross margins, but to some extent you have to pick your poison. Either keep your prices higher so your margins are better, but then lose market share to Amazon or not lose as much market share but have a hit to your profitability.”
A similar pricing study for Best Buy found that Amazon still has lower prices than the electronics retailer, but the price difference is “not nearly the gulf” that it has been in the past.
“Best Buy is price matching Amazon in their stores,” says Chukumba. “You find a TV that’s $1000 bucks at Best Buy and you know it’s $900 at Amazon because you just checked on your smartphone, they’ll give it to you for $900. It really disincentivizes the consumer from show rooming because more and more they can get the same price in stores as they could on Amazon.com.”
Chukumba, who offered no love for Amazon, expects the Seattle-based company will have a “day of reckoning” with its investors someday.
“You now have over $50 billion in sales. You’re now one of the largest retailers in the world and with that type of sales you still can’t make money? That’s when I think things will get very interesting for Amazon,” he says.
“Brick-and-mortar retail would never get to that kind of scale that Amazon has with those type of operating margins. Investors would revolt. Management would be thrown out.”
But Amazon’s founder and CEO Jeff Bezos has said from the beginning there are more important things for his company than turning a profit, including cash flow.
As early as 1997, Bezos said a chief measure of “our success will be the shareholder value we create over the long term.” That’s a message that is repeated in some way every year through the CEO’s annual letter to shareholders.
By LINDA THOMAS