E-Retail Strikes Back: Amazon’s Latest Strategies in War for Holiday Shopper Dollars

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Neither Amazon nor any online seller can expect consumers to keep using their sites for holiday purchases simply out of habit.

Brick-and-mortar stores have had plenty of time to strategize ways to counter the rise of “showrooming” and increased online shopping in general, which was the most noticeable trend of the 2011 holiday season. In the weeks leading up to Black Friday 2012, the hottest retail stories have involved efforts by physical retailers to battle back against Amazon and other online sellers with fee-free layaway, price-matching guarantees, and such.

Amazon, which has long been targeting and attempting to take down its brick-and-mortar competitors, now finds itself in the crosshairs. “There’s increased competition from mass merchants and big-box retailers,” Morningstar analyst RJ Hottovy told Reuters. “You could see margins somewhat challenged this season. I’m not expecting blow-out numbers from Amazon in the fourth quarter.”

(MORE: By Matching Online Prices, Are Best Buy and Target Doing Exactly What Amazon Wants?)

Amazon isn’t simply resting on its laurels, banking on the idea that shoppers will keep using its services because they did so in the past, however. Amazon is taking action. Multiple actions, actually.

As you might expect, Amazon is offering its own special breed of an extended Black Friday sale, with “Lightning Deals” that are already underway and an entire week’s worth of “Black Friday” sales. This will inevitably be followed by Cyber Monday specials that last much longer than a mere 24 hours.

The initiatives go well beyond the usual lineup of plain old holiday deals, though. In early November, Amazon launched a Wine Store, giving customers the option of buying bottles from thousands of wineries around the U.S. at the Amazon site for the first time, with shipping available at a rate of $9.99 for six bottles. Around the same time as the wine announcement, Amazon introduced Amazon Prime on a per-month basis. Normally, Prime—a service that includes free two-day shipping on most orders, as well as unlimited streaming from Amazon’s video library and access to the Kindle lending library—costs a flat $79 annually. Now, for those who don’t want to commit to an entire year’s service, Prime is available for $7.99 per month. By no small coincidence, that’s the same price for basic Netflix streaming service.

When consumers join Prime, it’s been demonstrated that their purchasing at Amazon tends to go through the roof. This is how things play out because shoppers really want to take advantage of Prime’s free two-day shipping, sometimes to the point that they don’t bother shopping anywhere else.

(MORE: Ouch! Majority of ‘Hot’ Holiday Toys Cost $50 or More)

But even consumers who do shop around have good reason to wind up making their purchases at Amazon. A new Bloomberg News study reveals that Amazon is generally the place to go for the best prices on toys:

In a comparison of 125 randomly selected toys conducted on Nov. 8, Amazon had lower prices than Wal-Mart on 44 percent of the items, while Wal-Mart had the advantage on 13 percent. The remaining had the same price tag.

The study looked at Target, Kmart, and Toys R Us as well, and found that while Amazon tended to have the cheapest options, Walmart was a strong contender, beating the other stores on price more than 80% of the time.

Yet another Amazon strategy to boost sales is the expansion of its “Lockers” program. Last year, the world’s largest online retailer began allowing customers to make purchases and have them shipped to lockers at 7-Eleven convenience stores, where they could be picked up (with a security code) within a specified window of time. The lockers are expected to pop up soon in RadioShack and Staples locations as well.

Meanwhile, ShopRunner, a competitor of Amazon Prime that also offers two-day free shipping on a wide range of merchandise for an annual fee, is rolling out its own lockers for pickup at select Toys R Us and 7-Eleven stores in the Philadelphia area. The option is being called ShopRunner PickupPoints.

(MORE: Holiday Shoppers Can Look Forward to an Extra Bloated Black Friday)

Finally, payment processor PayPal has launched an impressive price-matching guarantee meant to boost usage of its service for the holidays. Make any purchase with PayPal now through December 31, and if you see the identical item advertised at a cheaper price within 30 days, PayPal will reimburse you the difference. The offer covers purchases made anywhere with PayPal. That includes transactions at some physical retail locations, of course. But PayPal is most widely used online, so if the new policy has any noticeable effect, it’ll be giving a boost to e-retail.

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