Big-box retailers "fight to the death" for market share
The war between big-box retailers is heating up in a battle that CBS News financial contributor Mellody Hobson said is great for the consumer, but terrible for business.
"This is a fight to the death for market share," Hobson said Tuesday on "CBS This Morning."
Amazon (AMZN) and Walmart (WMT) went head-to-head with huge one-day sales last week, Target (TGT) is boasting big-time back-to-school deals and Best Buy (BBY) is prepping for its Black Friday in July sale this weekend.
But as the retailers duke it out, their bottom lines are suffering.
"Their profitability is much lower," Hobson said.
Sales events don't always get the best customer reaction. Customers took to Twitter to express their disappointment with an apparently lackluster selection of sale items on Amazon's Prime Day.
Bought two Roombas during #PrimeDay, and now I'm going to have them battle it out in my living room for my approval.
— Daniel Carrillo (@DanielRCarrillo) July 15, 2015
So what I'm getting out of this is that #PrimeDay is some sort of postmodern experiment to see if disappointment can be quantified.
— Brad Williams (@FuriousBrad) July 15, 2015
All I've learned from #PrimeDay is that @amazon has GROSSLY miscalculated my interest level in discount vacuums and cat toys.
— mah ree nah (@marinarachael) July 15, 2015
Furthermore, with a constant digital flood, from daily e-mail reminders to pop-up ads, Hobson said retailers are finding it difficult to compete with each other.
"What they're trying to do is distinguish themselves with private labeling," Hobson said. "They want to be able to say to their customer, we have something that you can't get anywhere else. Even if it's something as simple as a different color."
But with so much information available online, consumers aren't fooled.
Hobson spoke to a CEO who talked of a "savvy" consumer.
"He said she knows what she wants, she's budget-conscious, she knows quality and value and she knows what she wants to pay, and if it's not worth it to her, she will not buy it," Hobson said.
Shoppers can also come down with a case of sales fatigue, turning an over-abundance of sweet deals sour. In addition, Hobson said customers have become trained to wait for event-driven sales.
"In advance of those sales, the consumer pulls back and waits. And that's bad for the retailer," Hobson said.
And the sales data shows it. Retails sales dropped 0.3 percent in June while sales for privately-held companies grew 6.6 percent.
"So what we see here is that it is really the retail behemoths that are battling to the death when it comes to prices, and they are not getting much out of it," Hobson said.
It's not all bad though, according to sales information released from Amazon. The company reported a 266 percent growth in orders and sold 34.4 million items. Walmart did not provide sales figures, but said they reaped triple-digit order growth and same-day store pick up hit an all-time high.