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Discount War Causes Complications for Smaller Retailers

10 July 2020 - 11:05 by Paul Tissington

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While safe shopping online has risen dramatically as a result of the coronavirus pandemic, it seems that consumers are spending most of their cash with a handful of big brands, meaning that other retailers are struggling to compete.

This is the finding of a new report from Wunderman Thomson Commerce which revealed that major players Amazon and Tesco are edging out their rivals through the heavy discounting of products. Slashing prices so much is only achievable on the scales that these two dominant brands operate at, meaning that in order to match them their rivals are seeing their profits shrink significantly.

A fifth of consumers questioned in the study said that they were concerned about the fact that Amazon in particular was taking such a significant slice of the entire e-commerce market and not leaving its rivals much room to grow because of its aggressive discounting strategies.

Even so, one in five people said that they would actually be aiming to increase the number of items that they ordered from Amazon, even after the threat of COVID-19 has diminished and the retail market can largely get back to normal.

This particular report suggested that almost two-thirds of all retail sales activity was concentrated on the web over the course of the national lockdown imposed to prevent the spread of the virus. This is a higher proportion than is normally seen, although analysts also believe that conversion rates were actually lower during this period as consumers decided to be particularly picky about where they shopped online.

While low product prices are not the only thing which influences where people shop, they certainly make a big difference in terms of retailer profits, and discounts favour larger brands over those that have less flexibility to lose money on items that will bring consumers through their digital doors.