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Price Matching Is No Threat to Amazon

10/19/2012

The holiday shopping season is bearing down and retailers are bracing for stiff competition from Amazon.

Both Target and Best Buy announced they will match the prices of their online competitors, but this could be a risky move.

The aim of the price-match programs is to stop showrooming, where shoppers armed with smartphones and tablets check out the merchandise at stores and then find it cheaper on the Web. Showrooming began in earnest last holiday season when Amazon CEO Jeff Bezos, encouraged shoppers to compare prices in-store with those online – at his “store”, Amazon.

An informal check, using Amazon’s Price Check app, confirmed that Best Buy’s and Target’s average prices were higher than Amazon’s. For example a scan of a Westinghouse 26″ LCD HDTV on sale at Target for $349.99 was a stunning $219.99 at Amazon’s Frugal Buys retail partner.

Another aspect of Price Check is the “Share in-store prices with us” button. Brilliant! Legions of smartphone armed shopping ninjas are providing real-time competitive data to Amazon. As a digital retailer, Amazon can adjust prices on the fly to keep its edge over the big boxes.

Here’s where price matching gets dicey. Target says shoppers have to bring in proof that a lower price is available. That is understandable from Target’s perspective but it sets the stage for two unintended consequences.

First, it encourages online price checking when shopping in Target. When shoppers know Target will match a lower price elsewhere – you’re darn right they’re going to check. This will highlight that products are often cheaper online. Not good for Target.

Second, it is time-consuming. Shoppers have to prove to Target employees they have evidence of a lower price elsewhere. Imagine standing in line behind someone buying several items while having to scroll through their smartphone to find the lower price they saw earlier. Longer check out only proves it is easier to shop online. Not good for Target.

Target and Best Buy have the advantage of immediacy. If I’d “needed” the Westinghouse TV last night to watch the Cardinals beat the Giants – I would have bought it at Target. Purchasing big-ticket items like TV’s rarely has that kind of urgency.

Interestingly Walmart has not entered the price-matching trend. CEO Mike Duke has said they haven’t figured out how to implement it. It’s likely Duke is referring to the two points illustrated above.

How does a retailer price-match without shooting itself in the foot? It doesn’t appear that Target or Best Buy have figured it out.

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