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Price Matching Policies: Keeping up with Online Retail

Rudolph, Frosty, and the rest of the holiday gang have hung up their jackets for a well-deserved 10-month long vacation. Meanwhile, the rest of the world is enjoying the gifts they received from Christmas, Hanukkah, or whatever holiday they celebrate.

It was a great holiday season, for customers and online retailers alike. The growth of ecommerce has been revolutionizing retail as we know it. Brick and mortar retailers once dominated the market, but the popularity of ecommerce has given more power to online sellers and marketplaces, leading to many big box retailers venturing into the online channel themselves.

However, these retailers are still going to great lengths to keep their brick and mortar stores up and running. There are challenges with competing against online retailers in a brick and mortar setting, namely the inability to reprice efficiently. Amazon is known to change its prices as many as 2.5 million items a day, a feat that is not humanly possible in a physical store (not that a physical store would even be able to have that many products). Online price transparency and ease of price comparison leads to a phenomenon known as “showrooming”, which is when people find a product in a store, check the price online, and purchase it online, costing the store a sale.

How to Combat Showrooming

When it came to the 2014 holidays, people were looking for the best deals, online or in-store. As the fear of showrooming fell over brick and mortar retailers, many turned to a “price matching” policy to combat brick and mortar’s nemesis. Basically, if you could show the store a lower price for the same item online, they would sell it to you at that price. Notable retailers including Best Buy, Target, and Walmart adopted similar price matching policies in hopes of producing high sales and traffic for their brick and mortar stores.

So how did it work out? Well, Retail Next has reported that retail store sales fell 8% during the 2014 season, and foot traffic fell 8.3% during November and December. Thanksgiving sales dropped 11%, and foot traffic was 5.2% lower than it was in 2013. Overall, total shoppers on Thanksgiving weekend fell from 248.6 million to 233.3 million. It appears the price matching policy was not as successful as many had hoped.

How Did Online Retail Perform?

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Interestingly enough, IBM has reported that Black Friday online sales were up 9.5% from 2013’s results. Thanksgiving online sales increased 14.3%, and overall holiday online sales increased by 13.9%. Even Walmart reported Cyber Monday as the most popular day its website has ever seen. As a matter of fact, overall holiday sales should show a 3.5%-4% increase from 2013. Not because of price matching policies or brick and mortar sales, but because of online sales.

Online retail’s presence is becoming a force to be reckoned with. As of right now, the numbers have proven big box retailers’ price matching policies to be rather unsuccessful. But why?

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Theoretically speaking, price matching policies should enable big box retailers to keep up with online retail. Unfortunately, empirical evidence has proven this to be untrue. Why didn’t it succeed? Well, if you observe the guidelines behind these policies, there are a handful of technicalities consumers had to abide by:

  • People are not going to go through these terms and conditions laid out to them when they could just go ahead and purchase the item online at a lower price with one click.
  • Only certain competitors were observed, so even if you did find the same item at a lower price, the store would not match the price if it was more of a local, independent retailer.
  • As an article on the Today Show website explained, many clerks at these stores would react negatively to price matching policies. They would often act like the customer was stealing money from their pocket.
  • It could not be a screenshot, it had to be an advertisement, either in print or directly from the consumers’ mobile devices. Some people made fake web pages to dupe Walmart, buying $400 devices at $100, and they succeeded. That also resulted in some retailers limiting price matches to certain competitors, adding more terms and conditions for consumers to read through.

How Retailers Can Take Advantage in 2015

Price matching policies may not be the solution to brick and mortars’ problems caused by online retail giants after all. Online shopping is convenient, and many online retailers are merchandising their webstores to reinstate the customer experience that was once lost in the world of online retail. But brick and mortar retailers aren’t the only ones feeling the heat: other online retailers are feeling the pressure from the larger industry giants. Most big box retailers have optimized their websites to appease consumers, so how can the smaller ones keep up?

  • Make sure your website runs smoothly. People are going to want the easiest, most convenient online shopping experience.
  • Offer incredible customer service and inexpensive or free delivery. One thing many online retailers struggle with is bringing the in-store experience online. Having helpful live chat readily available and little to no shipping fees can make up for a once-lost experience (and justify a premium).
  • Carry the top products your competitors sell and more. Performing a gap analysis and optimizing your product assortment can put you at an advantage to the competition.
  • Price like a pro. While brick and mortar retailers can’t change prices throughout the day, online retailers can. Automated price comparison can help you benchmark against competitors and incorporate business intelligence to your pricing strategy.

Dynamic pricing can help retailers of all sizes keep their prices competitive and profitable. It can be hard to keep up with a giant like Amazon, but keeping up with big box stores is proving to be extremely successful. Using dynamic pricing, you can beat competitors’ prices and stay profitable.

Now is the time for online sellers to capitalize on these opportunities. Analyses have proven that many people are beginning to make the world wide web their shopping destination of choice. Maybe it’s the convenience of not having to leave the house. Maybe it’s the low prices. Regardless of the reasons, now is the time for online retailers to show the world that they can offer a great customer experience, at an affordable price, right in consumers’ own living rooms.

How else can online sellers counter brick and mortar price matching policies?

Contributing Writer: Brian Smyth

Arie Shpanya

Arie is the former COO, Executive Chairman, and Co-Founder of Wiser, a dynamic pricing and merchandising engine for online retailers and brands. He has extensive experience in business development with a focus on eCommerce (eBay and Amazon), and is a guest blogger on Econsultancy, VentureBeat, and more.

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