Many epic battles have been fought on soil, but far fewer in cyberspace.  Leave it to Walmart and Amazon to break that barrier.  Walmart and Amazon (and newcomer Target) are currently locked in an all out price war over online book sales that has culminated into the American Booksellers Association asking the Department of Justice to launch an antitrust investigation.

It all started when Walmart, determined to aggressively drive traffic and sales this holiday season,  announced it would allow customers to preorder 10 of the most highly anticipated books for $10 each.  Within hours, Amazon matched this low price for all 10 titles.  Not to be out done, Walmart lowered its price to $9; Amazon quickly followed suit.  By the next day, Walmart lowered its selling price to $8.99.  A few days later, Target jumped into the ring by matching Walmart’s price.  Determined to maintain its lowest price guarantee, Walmart again dropped its price by $.01.

So what have these loss leaders helped Walmart, Amazon, and Target gain?  One thing for certain is interest in these books.

Traffic to the product pages for the 10 bargain books jumped significantly after the initial price cuts and continued to climb as prices fell.  While staying well above pre price cut levels, interest waned slightly for a couple days until Target threw its hat into the ring.  Joining so late in the game, however, proved to be a detriment to Target, as it has not been able to drive customers to its site as well as its competitors.

Over the course of this war, interest in these books at Walmart has been fickle.  Despite lowering prices first, Walmart has been unable to unseat the online book king in terms of the number of people shopping for these books.  In fact, over the last few days, interest in these books at Walmart has declined even more while traffic to Amazon has stayed high.  Additionally, Walmart bargain book shoppers are twice as likely to shop for these titles at Amazon as Amazon shoppers are to shop at Walmart.  It seems that when offered comparable prices on books, consumers prefer Amazon.

A similar story emerges when you look at the share of bargain book visits between the retailers.  Before the price drop, consumers primarily shopped at Amazon for these books while only a small percent shopped at Walmart.  Post price drop, more and more customers turned to Walmart for these books, but Amazon still retained the majority of shopping visits.  Target’s entrance into the war a few days later had little effect on consumer’s propensity to shop at Amazon, but instead stole visits from Walmart.  In the past several days, consumers’ shopping habits began to slowly return to status quo by shifting back to Amazon.

Regardless of the effect this pricing strategy has had on competition between these retailers, loss leaders are intended to do one thing—drive more sales.  And, indeed, the two main players were quite successful in accomplishing this goal.

So what can we learn from the Book Price War?  Loss leaders work?  Maybe.  Amazon is a fierce competitor?  Probably.  Customers love a great deal?  DEFINITELY!  If the past 2 weeks are any indication, we are sure to see a highly competitive holiday shopping season packed full of deals for consumers, and perhaps a few more price wars.  Maybe next we will see Toys R Us match Walmart’s selection of toys for $10…

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