Understanding Amazon Price Disruption
Source: Channel IQ
Amazon does not intend to be the low-price leader in the online channel, the result of their price matching strategy is amplification of the lowest price in the online marketplace. To understand price matching, it's important to understand that there are two basic types of product distribution into the online channel: intended and unintended. Each type contributes to price disruption in a different way. Intended Distribution includes established retailers like Walmart, drugstore.com, BestBuy, and, of course, Amazon Retail. When these retailers price promote online or execute EDLP, Amazon price crawlers find these prices and match them. If the EDLP and/or promotions rotate Intended Distribution sellers throughout the year, the net effect is Amazon offering the equivalent of EDLP plus promotional prices year round.