Lowest Prices? That's Amazon, Not Walmart, Say Value Shoppers

Before you go, we thought you'd like these...
Before you go close icon
WalmartWhen it comes to currying favor with America's value shoppers, Amazon is eating Walmart's lunch, according to an online survey.

Walmart's (WMT) standing as the nation's cheapest place to shop is waning in the eyes of low- to moderate-income online consumers, according to the YouGov BrandIndex.

Walmart's value score has declined markedly in the past two years, down from highs in the 50s to its current score of 22 on a scale of 100 to -100. At the same time, Amazon's (AMZN) image as a value retailer gained steam: The e-tailer's score rose from near parity with Walmart's to 71 today.

YouGov bills itself as the only daily consumer perception research firm. Its BrandIndex reflects interviews with 5,000 people each weekday from a representative U.S. population.

The question YouGov asked to generate these scores was simple: "Does [the retailer] give good value for what you pay?" Results were filtered by Internet shoppers who make an annual income of $50,000 or less.

Walmart, which became the world's largest retailer by marketing itself as the world's cheapest retailer, has also been fighting to hold onto its discount credibility amid the growing popularity of dollar stores.

To that end, the retailer is investing $2 billion to revive and strengthen its low-price bona fides, which Walmart executives concede have fallen short of late.

Meanwhile, Jeff Bezos, Amazon's quirky CEO and founder, has been building up the e-tailer to be the shopping destination for online bargains on the widest possible assortment of merchandise -- essentially the Walmart of the Web.

Amazon's low-cost operating model isn't weighed down by store operating costs, and the company has made a practice of skirting state sales tax laws to offer shoppers even lower prices.

Amazon's Continuous Evolution

It comes as little surprise that Amazon is stealing Walmart's discount thunder, says Kenneth Wisnefski, founder and CEO of Webimax, which develops online marketing strategies for retailers such as Aéropostale (ARO) and Sam's Club (WMT).

Sponsored Links
"The reason Walmart is declining in value perception is quite simply because they have not done enough to capture the online shopper," he tells DailyFinance. "We have Amazon.com, a fortress in e-commerce and online shopping, continuing to offer new brands, discounts and incentives, while Walmart is being left in the dust," he says. "The depleting value stems from their lack of online presence and their inability to offer multiple brands at various price points."

And Walmart's discount edge isn't only dulling in the eyes of lower income shoppers, Wisnefski says.

"While the study discusses a low-income shopper, the reality is, the majority of consumers are focused on finding the lowest prices and best deals online," he says. "The 2012 consumer is price savvy and is becoming more experienced as to how to bargain shop for products. With the major shift in retail moving online notably over the past 10 years, consumers now have almost 10 years' worth of experience in online shopping and price comparison.

"Walmart can compete better by offering numerous brands of the same product -- as Amazon does -- however they will have to institute an aggressive strategy to capture some of Amazon's market share, which won't be easy," he says.

NEXT: 5 Big Retail Chains That Will Be Gone in 5 Years

9 PHOTOS
5 Big Retail Chains That Will Be Gone in 5 Years
See Gallery
Lowest Prices? That's Amazon, Not Walmart, Say Value Shoppers

Click through to see 5 Big Retail Chains That Will Be Gone in 5 Years

By Rick Aristotle Munarriz, The Motley Fool

1. Barnes & Noble (BKS)

When the last of the Borders stores closed its doors forever a few months ago, it was only natural to view Barnes & Noble as the obvious beneficiary. Bibliophiles would just flock to the other gargantuan bookstore chain, right?

Wrong. Things aren't going so well at B&N. Sales actually fell in its latest quarter, as sales of the lower-margin Nook e-readers can't make up the sharp decline in physical books.

Yes, B&N is ready for the passing of bound books, but what will this mean for its cavernous stores? Store-level sales will continue to decline, and folks will continue to download their books from a wider variety of sources.

2. Sears Holdings (SHLD)

Lousy sales for Sears and Kmart during the holiday season proved that both department store chains continue to fade in relevance for bargain-seekers, and in late December, the parent of the two struggling retailers revealed that it would be closing as many as 120 stores.

Sears Holdings is in a lose-lose situation. It needs to update its stores if it wants to stand a chance against its "cheap chic" rivals. Unfortunately, the company just began tapping its credit line, so it's not as if it can afford the necessary upgrades.

Sears itself has been around for several generations, dating back to its mail-order catalog. Could it really disappear in the next five years? Well, Woolworth was around for more than 100 years when it was liquidated in 1997.

3. Best Buy (BBY)

Everyone seems to be buying smartphones and tablets. They're just not buying them at Best Buy. Shoppers are finding cheaper prices online, forcing Best Buy to shave its already meager margins just to remain competitive.

It gets worse.

"Best Buy's worst fears are coming to fruition," I wrote after the consumer electronics retailer's latest quarterly report. "The same shoppers whom it has armed over the years with smartphones, tablets, and laptops are now using those devices to find better prices online. Even when folks do walk into a store, they can seamlessly compare prices on their smartphone to make sure that they're getting the lowest price."

Let's also not forget that these are also the same devices that are making all of the shelf space that Best Buy has been devoting to CDs, DVDs, books, and video games obsolete.

For growth, Best Buy has turned to smaller stores that sell only mobile products. That strategy may or may not pan out over time, but either way, the gargantuan Best Buy stores as you know them now are toast.

4. RadioShack (RSH)

If Best Buy focusing on bite-sized stores emphasizing wireless handsets through different carriers and related accessories sounds familiar, welcome to RadioShack. The small-box specialist got into that game awhile back, after realizing that folks just don't need to stop by a strip-mall shop anymore to pick up some batteries or a remote-controlled car.

Is this market wide enough for both RadioShack and Best Buy Mobile?

Forget about the future. RadioShack's situation is ugly right now. The retailer has missed Wall Street's quarterly profit expectations all year long.

5. GameStop (GME)

Today, GameStop has one of the most profitable retail models around. The growing retailer's stores stock the latest gaming systems, video games, and accessories. Margins aren't that hot on hardware, but they're pretty sweet on software.
However, the juiciest part of GameStop's model is where gamers trade in their tired games and systems for store credit. GameStop goes on to resell those items at huge markups.

GameStop stores don't need a lot of selling space given the compact nature of their merchandise, so they fit conveniently in the middle of strip malls where rent is cheap. Sales have held up reasonably well, even though video game industry sales have been largely languishing since 2009.

GameStop definitely doesn't seem very endangered now, but now that even Best Buy and Amazon.com (AMZN) are accepting trade-ins, the most lucrative part of the GameStop model is under attack.

Let's also flash forward a few years. As console makers shift to digital delivery of software, where does GameStop fit in? The retailer has made some intriguing acquisitions in digital delivery, but the days of GameStop's physical stores are numbered.

Add It Up

Some of these chains will last longer than others. GameStop's balance sheet is a far cry from Sears Holdings, where credit ratings agencies are biting their nails as they ponder downgrades. However, all five of these concepts just aren't built to last in today's retailing climate.

Enjoy them while you can.

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION




Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners