Three online retailers are caught up in a pricing slugfest in an attempt to capture greater market share. No matter which company comes out on top, retail exchange traded funds (ETFs) may reflect the surge in consumer spending as the price war intensifies.
Wal-Mart (NYSE: WMT), Target (NYSE: TGT) and Amazon (NasdaqGS: AMZN) are engaged in an online price war over DVDs, reports Jeremy Hobson for Maretplace. (How name brands are boosting consumer staples).
Wal-Mart lowered prices of popular DVDs to $10 in hopes that the low prices would help draw customers to shop at their site and buy big-ticket items. Not to be bested, Amazon is offering DVDs at $9.99, but Wal-Mart countered with a $9.98 offer. (Internet ETF to capture holiday shopping climate)
Jeff Dotson, marketing teacher at Vanderbilt University, says these companies are operating on thin margins, and if enough copies of DVDs are sold, the companies can take a hit. Frank Luby, pricing expert at Simon Kutcher and Partners, argues the online retailers are taking a necessary hit in order to obtain the title of “lowest-priced retailer.”
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- First Trust Dow Jones Internet Index (NYSEArca: FDN): currently up 67.5% year-to-date; AMZN is 5.6%
- Vanguard Consumer Discretionary ETF (NYSEArca: VCR): up 37.3% year-to-date; TGT is 3.0%, AMZN is 2.8%
- Retail HOLDRs (AMEX: RTH): up 24.3% year-to-date; WMT is 20.2%, TGT is 8.5%, AMZN is 7.3%
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.