Amazon.com vs. Wal-Mart: Price War!

So much for the cold war on hot hardcovers.

Wal-Mart Stores (NYSE: WMT  ) and Amazon.com (Nasdaq: AMZN  ) are throwing the book at one another. Bibliophiles may love the collateral damage, but investors won't be so lucky.

Wal-Mart kicked off the hardcover hoedown yesterday, lowering prices on preorders for hot titles such as Dean Koontz's Breathless and Stephen King's Under the Dome -- new releases that typically sell in the high teens through the discounter -- at a mere $10. When Amazon clenched a dagger between its teeth and matched the price a few hours later, Wal-Mart marked down the same titles to $9 apiece. As of this morning, Amazon is right there at the $9 price point, too.

Beyond exploring what these markdowns will do to the margins of both companies -- since you know that the publishers aren't subsidizing these low, low prices -- let's dive right into all of the players poised for punishment.

Barnes & Noble (NYSE: BKS  ) is selling the same Dean Koontz book for $16.80 through its site this morning. Borders (NYSE: BGP  ) is at $19.60, and Books-a-Million (Nasdaq: BAMM  ) is selling it for an astronomical $25.20! Have fun collecting cobwebs, guys. The bricks-and-mortar chains are conflicted when it comes to cyberspace price wars. If they sell the books for a lot less online, they sacrifice walk-in business. Their well-read patrons are anything but stupid.

Amazon, Sony (NYSE: SNE  ) , and Barnes & Noble also have to worry about the impact of $9 hardcovers on their e-book readers. The primary appeal of these portable gadgets is that digital books cost considerably less than their hardcover counterparts. However, as of this morning, Amazon is selling the Koontz book coming out next month for $9, even while the Kindle version is priced at $9.99. Digital delivery is convenient and immediate, but Amazon won't sell a lot of Kindles if the digital books cost more than the hardcovers.

In other words, if Wal-Mart and Amazon are serious about the $9 price war on bestseller pre-orders, their combat will inevitably spill over into e-book price wars, too.

It's a great time to be an avid reader. Take advantage of these ridiculous prices before both retailers get cold feet and warm noggins. However, steer clear of this sector as an investment until the rubble settles.

Do you own an e-book reader, or will you be springing for one over the holidays? Share your thoughts in the comment box below.

Amazon.com is a Motley Fool Stock Advisor selection. Wal-Mart Stores is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services, free for 30 days.   

Longtime Fool contributor Rick Munarriz has been a Kindle owner since last year. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2009, at 12:32 PM, GoalieFoley wrote:

    The reason that AMZN & WMT can do this is because they make up the loss on book by selling $700 TV's and other costly good. (Why not compare AMZN's book sales against the others, oh yeah, they don't reveal those numbers)

  • Report this Comment On October 16, 2009, at 12:35 PM, kpinvest wrote:

    Amazon also introduced same day delivery yesterday for select cities. Amazon Prime customers pay $5.99 per item. Now you too can have that book that you really, really, really want to read, even if you're too lazy to drive out to a brick store to pick one up.

  • Report this Comment On October 16, 2009, at 12:52 PM, pnealley wrote:

    add to the confusion BAMM supplies Walmart

  • Report this Comment On October 16, 2009, at 2:02 PM, madmilker wrote:

    enough said....

    who is sitting in a washtub full of CASH?

    who is standing in a washtub full of DEBT?

  • Report this Comment On October 19, 2009, at 1:51 PM, scottydogbooks wrote:

    The overlooked aspect in this battle is the impact of the independent sellers on Amazon and B&N. Amazon is the leader by far in the number of independent sellers, with the ups and down of BN.com. The price war has sent what looks to me to be a panic with the independent sellers on AMZN dropping there prices to a self destructive level with thousands of penny books (plus 3.99 shipping) suddenly hitting what were already low prices. Understand that when I mention independents on AMZN, I am talking about a lot of little sellers and a huge number of giants that have moved online and sell through AMZN rather than try to compete with the online giants. Another important thing to remember is that Amazon has just merged with ABEs (the worlds largest bookseller). ABE's totally relies on indi booksellers, i.e. SBEs is a portal for independent sellers around the world. ABEs was part of the original team that launched Amazon. AMZN relies on indi sellers of books and other products for a large (undisclosed) part of its total sales and profits. No one knows the impact of the ABEs merger with AMZN, but it will be considerable and it meens a world market presence for AMZN and the Indi booksellers that are with either one or both. Watch this for a real power play! Dr.Scotty Freile ,SCOTTYDOGBOOKS

  • Report this Comment On October 21, 2009, at 12:16 PM, mikearthur wrote:

    Books-A-Million is selling the Koontz book for $16.80 with a member's price of $15.12. http://www.booksamillion.com/product/9780553807158?id=423174...

    Where did you get the $25.20 price?

Add your comment.

DocumentId: 1009401, ~/Articles/ArticleHandler.aspx, 4/17/2014 2:55:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement