Price-matching becomes retail holiday strategy

Nov. 2, 2012 | by Natalie Gagliordi

With Halloween officially over, the 2012 holiday shopping season will soon be in full swing. The spooky pumpkins will be replaced by smiling Santas, the malls will be packed and the Salvation Army bell ringers will return to storefronts — bringing out either your inner generosity or swift-walking, eye-contact-avoiding guilt. 

And while no amount of mental preparation can ready many of us for the long holiday slog, for many retailers, the holiday season prep begins long before the first fleck of fall. Just take this season's price matching proliferation. Heavy hitters like Target, Toys 'R' Us, Walmart and Best Buy have all announced price-matching plans to compete against the dreaded revenue-stealer that is online shopping.

This year's holiday shopping season is expected be a first of its kind. Smartphone penetration is at 50 percent, according to the Deloitte Annual Holiday Survey, and 7 out of 10 of those with a smartphone will use the device for or during a shopping experience. What that means for retailers is that the empowered shopper is an undeniable force — one that requires careful attention.

The concept of showrooming is a new buzzword and a result of the smartphone revolution. Some have issued a battle cry against it, others say to embrace it, but either way it's a consumer-driven power play that shows no signs of relenting. Price matching gives retailers a chance to keep the bargain hunters from making a purchase somewhere else and potentially culls some of the effects of showrooming.

But according to analysts, price matching is only a small piece to the retail puzzle. If retailers want to gain an edge, either over each other or online counterparts, they need to serve a complete package of value and service.

Dr. Pawan Singh, CEO and chief science officer at PeriscopeIQ, explained that showrooming is more applicable to higher priced merchandise, such as TVs or large toys. It doesn't necessarily mean that customers are buying online but that they might just go to a cheaper retail store.  

"Most large store chains will price match local store prices during the holiday season," said Singh. "The big change that is happening is stores didn't match online pricing, and now they are doing so selectively during the holidays."  

Best Buy, which has been hurt the most from showrooming, is ironically the most likely to benefit, said Singh, specifically from the top-line revenue perspective. However, Best Buy is in a bind, he said. 

"Too much price matching might devastate its bottom line," said Singh. "So Best Buy is dancing around its price matching policy — customers have to specifically ask for it, it only applies on specific days, it applies to selected products and store employees can refuse to match."

Contrary to Best Buy's approach to price matching, Walmart, Target and Toys 'R' Us have a more lenient policy that gives broader inclusion and flexibility for customers looking to find the best price. Whichever retailer comes out on top is dependent on how favorably consumers view its policy.

"Price matching alone won't be the key to any single retailer's success. Consumers have been to the circus and heard it all before," said Cliff Courtney, EVP and chief strategy officer for Zimmerman Advertising. "The retailer that wins at price matching will be the one that promotes it the best, both externally and in-store, and makes the process seamless for shoppers who pray to the alter of convenience."

It is also important for retailers to see online shopping as a complement to its in-store business, utilizing that precious multichannel strategy.

"Large store chains can have an advantage since they have multiple channels," said Singh. "In-store retailing needs to have competitive policies and if they're doing it right, they're offering multiple ways to purchase, price match, free web shipping and returns as well as pickup at a nearby store."

In fact, free shipping is another factor that weighs heavily on a consumers choice of where and how to shop. The Deloitte survey found that free shipping is not an option, it is a necessity. Shoppers are 56 percent more likely to buy for free shipping and free returns.

But according to Courtney, the incentive game has caused some in the retail industry to lose sight of the power of old-fashioned service.

"It's fear and loathing in retail, as we're now dealing with a case of incentives run amok," said Courtney. "As retailers continue to 'buy' customers with every incentive they can imagine, they once again neglect to imagine that quality, or selection, or speed, or experience can trump incentives. People buy Starbucks when the coffee is free at work. They put four-figure rims on their cars when the car runs just fine without them. It's about value, not price."

Read more about online retailing.

Photo provided by Niyam Bhushan.

Topics: Consumer Behavior , Customer Experience , Customer Service , Omnichannel / Multichannel , Online Retailing

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