Amazon Expected to Crush Christmas Rivals - Holiday Central

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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.

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Nov.26

2:13 PM ET

Wednesday, 26 Nov 2008

Amazon Expected to Crush Rivals With 'Ridiculous Deals'

Posted By:Cindy Perman

Topics:e-commerce | Holiday Central | Economy (U.S.) | Consumers

Sectors:Personal and Household Goods | Retail

Companies:eBay Inc | Amazon.com Inc

Amazon’s [AMZN Loading... () ] strategy is simple this holiday season: Low prices.

When asked to elaborate, Amazon spokesman Craig Berman replied: “Low prices, low prices, low prices.”

Tony Avelar / AP
With Amazon's low-priced strategy, every day is Black Friday.

Overall e-commerce sales are expected to be flat in November and December, according to a report this week from comScore. And, while Amazon is expected to fare better than its rivals this season, the low-price strategy makes clear that the world's largest online retailer isn't taking any chances.

“We are head-down focused on providing customers really low prices on the gifts they want to give for the holidays,” Berman explained.

Amazon rolled out a slew of holiday-sales offers this week, including its popular “Customers Vote” promotion, where it’s offering six days of its “most ridiculous deals” (up to 70-percent off) on everything from videogame consoles to flat-screen TVs and kitchen mixers. Customers get to vote on which of three products they’d like to see go on sale each day. Only a small number of the winning product will be offered at that price. The day before each sale, a random number of customers will be invited to buy the product at that price.

Amazon is also offering “Black Fri-Daily” deals (in other words, a different deal each day) through Monday, Dec. 1, and a chance for customers to win a $10,000 shopping spree.

They’ve also spiffed up their holiday-toy list with easier-to-use navigation and more product videos.

Tis' the Season:

Capitalizing on its fleet of consumer reviewers, Amazon rolled out a Holiday Customer Review Team, comprised of six of its top customer reviewers, to offer gift picks and other shopping tips. The reviewers are volunteers, not paid by Amazon, but they do get exclusive, early access to some of Amazon's best deals and get to keep some of the products they review.

“I think they pulled out all the stops,” said Jeffrey Lindsay, a senior analyst at Sanford C. Bernstein. “They’re far more aggressive than ever before,” he said.

Given this year’s tough retail environment, Amazon may not beat itself — the online retailer logged 42 percent sales growth in the fourth quarter of 2007 — but the 12 to 15 percent sales growth expected this year will likely crush the competition, Lindsay said.

“If you compare Amazon with its competitors, it’s absolutely killing them,” Lindsay said. “E-commerce sales are expected to be down to 1.5-percent growth — Amazon will outperform e-commerce by something like 10-times!”

Amazon is beating rivals like eBay [EBAY Loading... () ] for two main reasons, Lindsay said: Amazon’s top-notch customer service (eBay is still trying to catch up) and the quality of the Amazon platform.

“Finding what you want to buy is very easy and quick,” Lindsay said. “One quick click, and it’s on the way to your house!” he said. EBay’s auction process, meanwhile, can take a couple of days. “It’s kind of fun — but it takes two days,” Lindsay said.

Amazon also leverages its customer data well, Lindsay said. They offer customers a chance to make a wish list, then send reminders for customers to update them. They're also using blogs cleverly, he says, offering suggestions for what to buy everyone from your 13-year-old daughter to a soldier in Iraq. (Hint: an iPod!)

Not only is Amazon going to crush its competition this Christmas, it's in a good position for when the economy turns around in the middle of next year, Linsday said.

"Amazon has the scale and the cash to ride this out — they've effectively paid off all their debt," Lindsay said. "They're due for a fantastic performance next year."

You know, sometimes things just "click."

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