Price Wars Between Wal-Mart, Amazon

The publishing industry is worried about a Price War Over Books.

A tit-for-tat price war between Wal-Mart and Amazon accelerated late on Friday afternoon when Wal-Mart shaved another cent off its already rock-bottom prices for hardcover editions of some of the coming holiday season�s biggest potential best sellers, offering them online for $8.99 apiece.

Publishers, booksellers, agents and authors, meanwhile, fretted that the battle was taking prices for certain hardcover titles so low that it could fundamentally damage the industry and the ability of future authors to write or publish new works.

The price cutting began on Thursday when Wal-Mart announced that it would take pre-orders for 10 yet-to-be-published hardcovers for $10 apiece on its Web site, Walmart.com. Later that day Amazon quietly began cutting the prices of those same titles to the very same $10, prompting Wal-Mart to lower its price to $9, a markdown of 59 to 74 percent off the list price of the books. Amazon had matched the $9 price by Friday morning, and Wal-Mart had lowered its price again, to $8.99, by late afternoon.

The titles affected include Sarah Palin�s memoir, �Going Rogue�; John Grisham�s short-story collection, �Ford County�; Stephen King�s �Under the Dome�; Barbara Kingsolver�s new novel, �The Lacuna�; and the latest installment in the Alex Cross thriller series by James Patterson, �I, Alex Cross.�

Although Wal-Mart, Amazon and other retailers like Costco, Target and even pure bookstore chains like Barnes & Noble typically discount best sellers, they usually don�t take more than 50 percent off the list price. Wal-Mart�s move, and Amazon�s reaction, signaled a new threshold in price cutting for books and left publishing insiders wondering how low it would go when the beleaguered industry is already worried about the effect of $9.99 e-books and a slowdown in book sales over all.

On Friday a spokeswoman for Wal-Mart said in an e-mail message that the company would �continue to adjust our pricing so that Walmart.com offers the lowest prices on these top pre-sellers in books.� Amazon declined to comment.

�If readers come to believe that the value of a new book is $10, publishing as we know it is over,� said David Gernert, Mr. Grisham�s literary agent. �If you can buy Stephen King�s new novel or John Grisham�s �Ford County� for $10, why would you buy a brilliant first novel for $25? I think we underestimate the effect to which extremely discounted best sellers take the consumer�s attention away from emerging writers.�

Price-cutting is the name of the game

At grocery stores, 'Price-cutting is the name of the game'.

The grocery price wars are heating up, with no end in sight. Safeway just redesigned its yellow-shelf tags and slashed prices again in an "everyday low price" campaign.

It's the latest salvo in an all-out price war that started last year.

"In my 33 years in the grocery business, I've never witnessed any time like this where customers are so starved for value," said Greg Sparks, president of Safeway's Seattle division.

"These prices are going to stay down. This is not a promotion" this is a long-term commitment," he said.

Safeway Shifts Tactics

For another look at the grocery wars, please consider Safeway Shifts Tactics in Grocery Price War.

Safeway Inc. long banked on customers paying higher prices in return for top-notch fresh produce and upscale ambience in its Dominick's, Vons, Tom Thumb and other supermarkets. Now the third-largest U.S. grocery chain by revenue says it is cutting prices to stop shoppers from going elsewhere.

It may be too little too late. The Pleasanton, Calif., chain Thursday reported its third straight quarter of declining sales at stores open at least a year as earnings slid 35% compared with a year ago.

Some analysts think the company is half-heartedly cutting prices while continuing to build and remodel stores that are monuments to better days.

Even after its discounts, its prices are still higher. Safeway's prices are 10.7% higher than those of Kroger Co.'s, according to a September pricing study by J.P. Morgan, measuring identical baskets of 31 products.

Says Morgan Stanley retail analyst Mark Wiltamuth, "Safeway is on the wrong end of the trade-down occurring in grocery."

Over the past six years, Safeway invested more than $8 billion upgrading its stores and adding exotic fresh produce and a bevy of prepared foods. Then the economy tumbled. Stung by high unemployment and economic uncertainty, many Safeway customers trimmed food budgets and left for less expensive grocers or warehouse clubs including Costco Wholesale Corp. Safeway's embrace of olive bars and prepared foods were a turnoff to customers who took them as signs of extravagance.

Kroger, the nation's largest food retailer after Wal-Mart Stores Inc., has increased the frequency of its 10-items-for-$10 promotions and cut prices of about 400 health-and-beauty products to under $4 each. Supervalu Inc. reduced prices by 20% on staple items such as bread and breakfast cereal in several markets. Even ritzy Whole Foods Market Inc. has adopted the "value" message, showcasing recipes for meals that feed a family of four for $15.

Stater Bros. Markets, a regional chain with 167 stores in southern California, lowered prices this summer on more than 6,000 items while sending employees to rival stores in search of discounts to match.

"We are scraping the bottom of the tank right now on prices," Stater's CEO Jack Brown said in a recent interview. "I'm not going to let somebody steal my customer, because when this (recession) is all over, I don't want to go looking for my customer."

What's In The Basket?

Perhaps there are local variations but I shop at Dominick's (Safeway) and find their prices are consistently lower. However, I judge that by meat prices. Saving $.50 - $5 lb on meat will make up for many dimes elsewhere. I also only buy what is on sale. Sam's Club is significantly higher on meat, but if you are buying bulk cereal Sam's is better. I am quite sure Sam's Club makes back on meat what it loses on cereal.

Those with large families, would be advised to shop several stores, buying what is on sale in quantity and storing it properly.

For more tips, please see Queen of Coupons Feeds Family for $10 a Week; Grocery Price Wars Intensify; Paperless Coupons.

With grocery prices changing all the time, it may be hard to tell what is a good price or not unless you have a good memory. However, hardcover new release books from popular authors at $8.99 is a new low price for sure.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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