The war over smartphone price checks is heating up
It happened rather innocently the last couple of years as consumers started surfing the web while shopping in retail stores. But, the battle for price conscious consumers reached a fever pitch last holiday season. Amazon poured salt in the wounds of retailers by offering an additional $5 off if consumers used their Price Check app to scan bar codes in a retail store. Will it be an Amazon world, or can big box retailers fight back?
Retail store prices are under siege by web e-tailers
In the “old days,” consumers waited for Sunday ads to check prices before they went shopping. Today, 79% of shoppers research online before going out to stores. But, the new and increasing threat is the consumer today is armed with a smartphone and price app to literally stand in the aisle and check prices against the best deals on the web.
Allison Enright just published a timely piece in the Internet Retailer entitled: “Target takes aim at web-only retailers”. In this article, Enright quotes some amazing stats from a survey regarding the use of smartphones by in store shoppers:
- 58% of smartphone owners checked out electronic prices in a store AND then purchased elsewhere online
- 41% checked out shoe prices in store and then bought online
- 23% checked in store but bought appliances online
- 22% for sporting gear
- 19% checked in store, but bought home & garden online
Retail stores are doomed if they price match the web
It is every consumer's right to check prices. It always has been and always will be that way. What has changed dramatically is the growth of smart phones and the ability to check prices while standing right in the store aisle. In the US, the growth of smart phones has been dramatic:
- In the US, 44% now have smart phones, up from 18%
- In 2010, shoppers pent $3.4 billion using mobile phones
- eBay’s RedLaser price app was downloaded 16 million times
We have written previously about this subject -- there is absolutely no way that retail stores can consistently match web prices, even from their own websites. The old school retail strategy of lowest price guarantees is a recipe for bankruptcy. The biggest strategic challenge facing retail stores in 2012 will be consumers asking for prices they found on their smartphone by scanning bar codes in store.
How Target is taking aim at Amazon and price Apps
Target is certainly not the only retailer to be hit by the loss of revenue and profits from smartphone comparison shoppers. Best Buy is reported to have suffered considerable losses to web price based shoppers last year. Even Walmart’s flat growth is attributed in part to more smartphone price comparison shopping, especially for high ticket items.
Target has recently been much more vocal about fighting back against Amazon and web only based retailers. According to Enright’s article, Target is aggressively changing its policies:
- Target has sent letters to suppliers stating that it does not want to become a showroom for e-tailers selling the same products.
- Target has asked some suppliers to renegotiate agreements so that Target can be competitively priced with online only retailers.
- Target is considering membership or subscription based pricing for products sold in store at web based prices.
- Target will continue to aggressively expand “house brands” of products exclusively only sold at Target.
Walmart is also taking action, and adds a twist
Amazon’s holiday promotion of offering consumers $5 for scanning bar codes woke up and ticked off a lot of people. Be careful when you tick off the 800 lb. gorilla of retail! Walmart is aggressively building its own online web retailing presence to compete with Amazon. However, like Target, Walmart has policies that say its stores do NOT match prices found online, even those listed on their own-ecommerce sites.
In a very interesting twist, Walmart has actually opened some pilot web stores in California malls! The purpose of these stores is to act as showrooms for items that Walmart sells on the web. Consumers can touch and test some feature products in these stores, but can only make purchases from kiosks in the store directing them back to Walmart.com. A very smart way to challenge Amazon’s selection and web experience if you can deliver!
Why suppliers must care about smartphone price apps
It could be easy for manufacturers to say: “That’s the retailer’s problem … I will still get my sales regardless of where consumers purchase.” While that may be true, what will happen if consumers do not have an experience in store, or access to places to see demos, or have associates explain how to use products?
All of those things related to the consumer experience in store add to the costs of the retail store operator. If the consumer uses their store for the experience and then purchases from their phone elsewhere, that store can’t make sale. If the store matches the online price, it won’t make a profit given its extra overhead costs.
Imagine that you are Microsoft launching Windows 8. It is one of the most important product launches in your company's history. Not only will this new platform impact PCs, but will be pervasive across tablets and phones. If you were Microsoft, where would you rather have consumers experience the “wow factor” of your new Windows 8 – as a landing page on Amazon, or on end-cap demos and every device in Best Buy, Walmart and Target?
Consumers now hold the power of shopping by phone, anywhere any time. To survive and compete, retail stores must go back to the basic Law of the Retail Jungle: Differentiate or Die! 2012 is going to get a whole lot more interesting as even the largest retailers must differentiate on more than just lowest price.
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Sources:
- Retail Customer Experience: Target takes aim at web-only retailers, January 23, 2012
- Retail Customer Experience: Wal-Mart takes e-commerce to the mall, November 10, 2011
- Wall Street Journal: Retailers Try to Thwart Price Apps, December 23, 2011
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