Marketing channel article - Essay Example

The utilization of aggressive pricing strategies has become the new norm in the competitive retail market of the United s. Currently the retailindustry is in its most profitable season, Christmas season. During the last quarter of the year retailers obtain the majority of their sales, particularly when Christmas season officially starts after Black Friday. A retailer that is making a lot of noise this season due to their very aggressive pricing strategy is the online giant Amazon. During Christmas Amazon intends to lower their prices on 80 million products in order to undercut the competition.

The competition is reacting accordingly in order to ensure Amazon does not steal market share away from them. “Companies like Walmart, Best Buy and Toys “R” Us have already announced that they will not be undersold and will match any competitors’ prices in a printed flyer or website” (Loeb). The use of a matching pricing strategy can help retailers retain market share, but it does so at the expense of lowering profitability. The pricing strategies that are being used by major retailers are benefiting the customers who are going to be able to obtain bargain prices on many products.

Best Buy plans to match competitors prices as well, but this firm believes that they have a competitive advantage over Amazon because they are able to physically show its customers the products they want to buy in their showrooms, while at the same time offering great prices though its website. For other retailers such as Toys R Us Christmas season is more important to them since most of their yearly sales are dependent on the arrival of Santa Claus on Christmas. A matching pricing strategy was an obvious move for them due to their dependency on Christmas sales.

Amazon is leading the pack this Christmas season by offering daily sales on a high variety of items. The pricing strategy of Amazon intends to increase its market share as much as possible. It all starts on Black Friday for Amazon with deals on popular items such as smartphones, diamond rings, and Wrangler jeans. After Black Friday the company intends on adding deals each day on different items in order to motivate buyers to make purchases. Last year Amazon lead the industry with 2,840 prices changes on Black Friday.

Most of the prices changes were down, but some went up in order to offset the loss of profitability of reducing prices. This article showed that pricing is a critical factor that affects the buying behavior of consumers. Companies competing for market shares in a saturated market have to become aggressive in their pricing to attract customers and to beat out the competition. It is important for companies to be aware that lowering prices lowers profitability, thus only selected number of items can be sold at bargain prices.

Price wars can destroy profit margins, thus it is important not to get too involved in beating out the competition because a price war hurts everyone in the industry. It is clear from reading this article that Amazon has become the industry leader in pricing this Christmas season. Work Cited PageLoeb, Walter. 20 November 2014. “Amazons Pricing Strategy Makes Life Miserable for the Competition.” 1 December 2014.