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Can Target discourage price comparison shopping?

January 25, 2012

Moble apps such as the Amazon Price Check app make price comparison shopping easy

With price comparison shopping increasingly popular these days, Target wants to discourage its customers from engaging in this activity by asking vendors to support in-store purchases with exclusive merchandise and better prices.

A recent Wall Street Journal article reported that Target sent a letter to vendors last week asking them to provide more exclusive merchandise or lowering prices when such merchandise is not available. Targets hopes these moves will help it address shoppers who investigate products in a store and then buy them online at a lower price, an activity that is being driven by price comparison apps such as the one Amazon introduced in the fall.

“I don’t think it is overly surprising that you’ve got major retailers reacting to a pretty broadly accepted practice these days by consumers,” said Mark Beccue, senior analyst at ABI Research, New York. “People with smarpthones are looking for transparency and are using phones to check things out online.

“In a lot of ways, because mobile brought this activity to the forefront, mobile is revolutionizing retail,” he said.

A slippery slope
Target is also reportedly considering a subscription service that would offer lower prices on frequently purchased items.

Earlier this month, Target reported softer than expected holiday season sales with comparable store sales increased 1.6 percent in December. The numbers were below the retailer’s expectations as sales were soft in categories such as electronics, music, movies and books.

The retailer reportedly said in the letter that it is unwilling to let online-only retailers use its bricks-mortar stores as a showroom for their products and undercut its prices.

Given Target’s heft as the second-largest discount chain, vendors are likely to go along with the requests. However, pputting pressure on vendors may not be the best way to deal with the reality of this new consumer behavior.

“The product is the product,” Mr. Beccue said. “If you make it cheaper, that is a slippery slope for manufacturers and you can only go so far.

“If they go down the road of saying can we get exclusive merchandise and cheaper deals, that’s not going to work,” he said. “Maybe target pulls it off a little bit but who else can put that kind of pressure on vendors?”

The challenge that Target and others face is that because online retailers have lower costs and do not collect sales tax in most states, their prices are lower. However because shoppers are unlikely to stop using price comparison apps to find the best price for the products they are interested in, retailers should be considering other ways to enhance the in-store shopping experience than by trying to compete on the product.

A different approach
“Retailers have to think about this differently,” Mr. Beccue said. “They need to be looking at the ways to add value to making a purchase in a physical location.

“They need to think through the retail experience more,” he said.

Interestingly, while mobile is at least part of the problem for bricks-and-mortar retailers because it makes price comparison so easy, it can also be part of the solution.

Retailers can use mobile in a variety of ways to enhance the shopping experience.

Customer service is one area where bricks-and-mortar retailers have an advantage. Stores need to do a better job training store associates to help customers find what they want, arming them with mobile devices to enhance their interactions with shoppers.

Integrating loyalty with mobile can also help address the situation because it gives retailers a way to provide benefits around a wide array of product purchases.

Building recommendations into an app can also enhance the experience.

“If we’re talking about Target, they are going to lose a war on a product-by-product basis but are consumers going into a store for one thing or more than one thing?,” Mr. Beccue said. “By positioning themselves as a one-stop shop, they can use smarpthones to do personalized offers.

“There are a lot of things you can do with mobile to help you buy things,” he said.

“We need to continue to focus on the holistic approach for physical retailers using mobile.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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