November 8, 2018 11:30 AM, EST

Walmart Narrows Gap, but Amazon Prices Still Cheaper, Study Finds

A Walmart employee organizes store shelvesPatrick T. Fallon/Bloomberg News

Walmart Inc. is narrowing the online price gap with low-cost leader and is beating the world’s biggest e-commerce company on prices for baby products, according to a new study.

Online prices for almost 50,000 exactly-matched products were an average of 2.3% more expensive at Walmart than Amazon in a three-month period ending in June, according to price analytics firm Profitero, which released a new report Nov. 8. That’s narrower than the 3% price difference between them in a similar study the firm conducted in the third quarter of 2017.

The report highlights the intensifying price competition between the two retail giants. Walmart, the world’s biggest retailer, is trying to blunt Amazon’s growth by offering more products online with fast delivery options. Amazon ramped up the pressure with last year’s acquisition of Whole Foods Market to enter the brick-and-mortar grocery business dominated by Walmart.

“They’re in a race to the bottom,” said Keith Anderson, vice president of strategy and insights at Profitero. “It’s not great for the retailers, but it’s really not great for suppliers. I think they’re both trying to deliver the value their customers expect and still have an economically viable model.”

Overall, Amazon prices were an average of 13% lower than other major online retailers, according to the study, which compared Amazon’s prices for 100,000 products to the same products offered at various retailers including Walmart, Target Corp., Home Depot Inc. and Best Buy Co. Target prices for about 20,000 products were 11.9% more expensive than Amazon.

Walmart’s investments in baby products appear to be paying off. Walmart’s prices in the category were less than Amazon’s, albeit by a fraction of a percent. Walmart has increased its baby products, including adding a new version of its diaper brand, over the past year to lure young parents who otherwise shop at Target or Amazon, which also has its own diaper and wipes brands. Price is the most common reason cited by U.S. parents when switching diaper brands, according to research firm Nielsen Co.

“Strategically, baby is an important category,” Anderson said. “It’s one of the milestones in your life when you’re most receptive to new retailers and brands and it’s also a moment of increased consumption.”