Believe it or Not, Target and Walmart Prices Are No Longer Taking a Back Seat to Amazon's

Amazon (AMZN -1.14%) is a behemoth of online retail, selling more than the next nine U.S. online retailers combined last year, according to Statista. It's built a dominant position by offering consumers nearly every conceivable product, along with two-day shipping for its Prime members who pay $99 a year for faster shipping and other benefits.

But as you're shopping this retail season, is Amazon the best place to find a deal? Industry data shows that it may not be and I recently bought some common items from Amazon, Target (TGT 1.28%), and Walmart (WMT -0.65%) online to test where I should be shopping online. The results may surprise you.

Image owned by The Motley Fool.

Comparing the fierce online retail world
Studies are starting to show that Amazon isn't the low cost option it wants consumers to think it is. A year long analysis by Wells Fargo Securities LLC focused on clothing and shoes, electronics, housewares, and heath and cosmetics found Walmart had about 10% better prices than Amazon while Target was 5% less than Amazon. And both Walmart and Target are getting more aggressive with pricing and widening that gap. 

Fellow Fool Jamal Carnette recently highlighted ShopSavvy's report that showed Amazon is being beaten by Walmart on price on overlapping items. 66% of electronics items and 85% of TVs were found to be cheaper at Walmart than Amazon and the savings were 28% and 23% respectively. That's big money. 

Of course, it depends on what items you're looking at and when. Deutsche Bank recently compared 65 identical items earlier this year and found Amazon was 5% less than Walmart and 7.9% less than Target. That's smaller than the gap of 8.3% with Walmart just two weeks ago, showing how fast the dynamic can change. 

Walmart stores are now also price matching Amazon's online prices, adding another dimension to the competition. You can now get items today for low prices rather than waiting for them in the mail. 

A personal price test
Anecdotally, I've noticed Amazon being less competitive, particularly for items I normally buy at discount stores. So, I decided to look at the three companies, not only based on price but also on shipping time.

To compare Amazon, Target, and Walmart fairly, I decided to buy three common items I needed to purchase, and in each case, ordered enough items to qualify for standard free shipping. The minimum was $35 at Amazon and $50 at Walmart, and there is no minimum during the holidays at Target. I bought based on price on a per unit or per ounce basis, and chose the lowest cost item available in each case.

As you can see below, Amazon was the lowest cost for 5-Hour Energy, and tied for the lowest cost for Crest, but was the most expensive by more than double for soap. Walmart was actually the lowest cost overall. 

Source: Author's own orders.

Walmart was also the first to deliver all of my items, which was surprising given Amazon's large warehouse network. But Amazon didn't even ship the second of two packages until three days after my order, which accounted for the delay.

While Amazon may be the lowest cost option for some items, it's far from a slam-dunk when it comes to price. For shipping, I fully expected Amazon to be best because of its massive infrastructure. But once again it disappointed.

The price of not being Prime
What could have changed my shopping experience is if I was an Amazon Prime member. All of my items would have arrived in 2-days and maybe some added cost would have been worth it if I put value on that time. 

In fact, I used to be a Prime member, but I found most of my Amazon orders weren't really needed in 2-days, so I was paying for fast shipping speed I didn't require. Prime is essentially a convenience for consumers willing to pay for the faster speed. But it may also come with higher prices for each item you buy if Amazon's prices are becoming less competitive. 

Your online retail experience depends on you
At the end of this shopping experience, I have to say I'm split over which company I would shop with online in the future. Target and Walmart certainly have cleaner websites and shopping experiences. I appreciate not being bombarded with 20 options to buy the same thing, some from third party retailers who have prices out of whack with the market.

For simple items, Walmart has an edge, but like Target it doesn't have nearly the selection of Amazon. So if you need a random item, Amazon is the place to go. 

For a complete shopping experience currently Amazon has an edge, but the gap is closing quickly. If you're a heavy online shopper, Amazon Prime is likely the factor that will make Amazon the best retailer for you, but casual online shoppers don't have a major advantage buying from Amazon. 

At the end of the day, I think Target and Walmart will be able to largely match Amazon's prices and also offer in-store service. That will be a key in the future, especially if they can offer a faster shipping service. 

Amazon is no longer alone in online retail and investors should only expect the competition to increase.