How Much Longer Can Amazon Undercut Profits?

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Sept. 17 (Bloomberg) -- Forrester Research Vice President and Principal Analyst Sucharita Mulpuru discusses Amazon's hidden pricing with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Amazon does not like this but they have to deal with it.

Is there anything they can do the truth is, the retailer owns what the prices.

The retailer usually wins in a court case.

The only thing they would prefer to do is put that price up because it is a challenge because of the map restrictions.

What manufacturers are likely going to do is put more restrictions like unilateral pricing strategies that some of the stronger manufacturers have in place.

What is it doesn't -- why does the manufacturer want this in place?

There are different kinds of manufacturers.

There are some of the lower end commodity manufacturers and the higher end ones like boze or sony.

They want to have a little bit more of a premium price perception.

Imagine if you had an iphone and the price could vary on the same device i a couple of hundred dollars.

That is not good for apple.

How big are the price ranges?

Would it be a reflection of the product itself or be a reflection on amazon?

It's more the latter.

There will not be enormous discounts of 50%. it is not uncommon for an hd-t v to have a swing of $50 or a couple of hundred dollars.

There will be some variance.

We are not talking about half off.


That could make a samsung television look cheap.


Let's step back on the whole pricing strategy at amazon.

They continue to undercut everybody, all the retailers out there, and they do it by sacrificing their own profits.

How much longer can they do this?

That's a great question.

They have a pretty big appetite for winning on price.

They have been winning on price for several years now.

There are a few investment banking studies that have done good analyses on amazon and walmart and typically, amazon always wins.

The challenge is how to continue to do that.

They have been a breakeven business law -- model for all intents and purposes.

They have a third-party business that funds these discounts.

The trifecta of how they have been spending is a lot of aggressiveness and pricing, free shipping through super saver and their amazon prime program costs a lot and will keep giving all of those away until the market kind of values them along the lines of a technology company.

A seem to be in their own stratosphere right now.

Thank you for joining us.

. we will be back with the top 10 trades you don't want to mess ahead of the opening bell.


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