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Online Price Matching Bad for Business?

Written by Nickel - 2 Comments

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Online Price Matching Bad for Business?

While we’re on the topic online price matching at big box retailers (both Best Buy and Target have come out with new policies on this front), I thought it might be worth looking at how this might affect their bottom lines.

While the primary goal of these programs — to turn casual shoppers using the store as a showroom before purchasing online into buyers — is an admirable one, retail experts think there are a number of risks involved.

First and foremost, as I pointed in my post about the Best Buy policy, there’s a lot of wiggle room and there’s thus a risk that it might not be applied consistently or evenly across locations (or even employees within a location). This could lead to a healthy dose of confusion and anger amongst shoppers.

On top of that, there’s a risk that customers will jam the checkout lines while trying to save a nickel here and a dime there on a cartful of products. The end result here could be more anger and a tendency to drive customers online to avoid the hassle.

Also: Do Best Buy, Target, and others really want to encourage customers to start checking prices online? According to a survey by William Blair & Co., Target’s prices average 14% higher than Amazon’s whereas Best Buy’s prices were 16% higher. Encouraging customers to discover these differences might hurt in the long run, particularly if the price matching programs are short-lived or seasonal.

And finally… If the programs are too successful, profit margins could suffer.

It’s a fine line, but it seems like brick & mortar retailers have to do something to combat the loss of customers.

What do you think? Will these sorts of policy changes have a net positive effect on big box retailers? Or will the negatives outweigh the positives?

Source: WSJ.com

Published on October 20th, 2012 - 2 Comments
Filed under: Consumer

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Comments (scroll down to add your own):

  1. From my experience BestBuy prices were already in line with Amazon _last_ year. Admittedly I dont shop at BestBuy often (or Amazon ever), I made a purchase at BB last year and the in store price at BB was identical to Amazons “on sale/discounted” price; the item wasn’t discounted at BB, but was at Amazon, yet after the Amazon “sales” price it was the same as the BB “regular” price.

    Any how, if there is increased competition between brick-mortars and online retailers, that can only be a good thing for all consumers.

    Reading the linked WSJ article, it seems the price comparison isn’t including the “use taxes” that online shoppers are supposed to remit to their state…so the “savings” from online purchases are from shoppers cheating their state out of sales tax revenues?

    Comment by Anonymous — Oct 20th 2012 @ 10:55 am
  2. The free market is working. Eventually we will hit some sort of equilibrium where we have just the right balance of physical and online merchants. So far, I think there are still too many physical stores…so some of these companies will need to reduce and/or adapt.

    Comment by Anonymous — Oct 23rd 2012 @ 1:59 pm

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