Forrester: Having Different Web/In-Store Prices Is No Big Deal
Written by Evan SchumanSince the dawn of E-Commerce, retailers have struggled with whether they need to offer one price for the same product across all channels. Beyond the fact that online has a very different cost structure than in-store and can therefore profitably charge less, in-store managers have to deal with contracted minimum advertised prices (MAPs) set by manufacturers.
A new report from Forrester Research analyzes that dilemma and has one clean recommendation for today’s retailers: Don’t worry about it. Consumers either don’t care or they understand why the prices might be different. Let the prices be different and worry about more important matters.
“Most people don’t even think of doing comparisons across channels. There’s this perception that retailers feel they are losing because they had this policy of having to have consistent pricing,” said Sucharita Mulpuru, a Forrester VP and its principal analyst for eBusiness. “You don’t need to have this religious point of view. It’s OK if your prices are different in different channels.”
This debate is hardly new. In one of its last moves before the chain imploded, Circuit City established a one-price policy across all channels, a step partially accomplished by simply increasing Web pricing to match in-store MAP prices.
The Forrester report challenges some time-honored assumptions. For example, it says the perception that price-comparing consumers are bottom feeders who don’t have much money to spend is flawed. Well, they may well be bottom feeders, Mulpuru said, but they can often prove to be well-financed ones.
“Comparison shoppers tend to be higher income. They’re more educated and they understand the value of technology,” she said. “They are bottom feeders, but they’re rich as well. There are a lot of cheap rich people.”
Mulpuru’s point is a good one, but the analysis in the report supporting that conclusion is a bit thin. From the report: “The population segment that is most likely to use comparison-shopping engines—high tenure Web shoppers with more than 10 years of Web-buying experience—has household incomes that are 54 percent more than the segment least likely to use comparison-shopping engines”—that is, those shoppers with less than one year of experience shopping online.
The report, therefore, is saying that the universe of consumers who have less than a year of E-Commerce experience tends to be lower income than the universe of consumers who have more than one year of E-Commerce experience. It’s likely that in April 2010, the number of people who have less than a year of experience of Web shopping is going to skew a lot younger and/or especially Web-uncomfortable. Furthermore, I think it’s safe to say that the number of people who have only one year of E-Commerce shopping is decidedly smaller than a group consisting of those with “more than one year” of E-Commerce experience.
Still, as Mulpuru pointed out, “some 10 million households are coming online every year,” so it’s not as though a new Web purchaser is that unusual.
-Marc
April 8th, 2010 at 1:05 pm
This study is just plainly unreliable. Every person I know checks out the pricing between the web and the store! Just last week we found prom dresses in the JC Penny store for 90.99, and on the website for 59.99! As she had bought the dress in store, and then was sharing the dress with her mom by internet, she found the discrepency and is now embroiled with trying to get her refund for the difference. And JCPenny is giving her a hard time! The net result…about 5 people will now refuse to ever go into a Penny’s store! Is that the result you want! It is bad business to try to manipulate and cheat the customer! Be ethical when pricing! That is the only way to have a successful business.
April 8th, 2010 at 1:14 pm
Would be very interested in the actual Forrester report but couldn’t find it utilizing the data search provided here. What is the title of the report?
April 9th, 2010 at 3:15 am
Sucharita’s report is titled:
Higher Prices In Your Stores: OK Or Not?
How Consumers React When Store And Web Prices For An Item Differ
April 11th, 2010 at 2:38 pm
this report is from someone who obviously interviewed lots of people but isn’t involved in e-marketing to consumers or pricing. We know consumer shopping habits have changed post crisis .. across socio economic groups.. in the US and globe..and that price transparency is as important to a growing population in Mexico as it is in San Diego. Forrester is right only about the level of complexity here.. but most major store based retailers have processes to match site and store.. with the lower of the two prevailing when the shopper..and how to incorporate couponing/marketing
We think the real price challenge begin as social shopping with igital token/coupon exchange becomes a reality – transparency and data integrity will be the golden rule for e
April 12th, 2010 at 3:32 pm
This research does not seem to have been designed well, because what people answer on a form about simply choosing the lowest price and buying that whether it is online or in-store does not reflect the reality of making a purchase – what if you are in a hurry and need to buy a gift, but the in-store price is more expensive and you have to collect it in time, thereby forcing you to pay more, when you know it could be had for less? That would generate ill-will from customers and isn’t necessarily a good move.
In my experience, it depends on the store attitude, I have often been in shops where the in-store price is higher than the online price, but I will pull out my iPhone and load up a price comparison site and show them not only their own lower price online but that of other stores offering a better deal, and most times they will offer to match the best price – I guess the way they see it is to make a small profit and retain a customer than to make nothing at all.
April 12th, 2010 at 7:18 pm
I agree, 60% Only…REALLY?? Everyone I know Shops Online. Everyone I know subcribes to their Favorite store’s emails to get the best pricing available on things they were gonna buy anyway. Online Shoppers are Savy Consumers. There is no reason to pay 100% retail except for the fact that you want something RIGHT NOW.
Even so, there are many sites where you can order online & do a Store Pickup within hours like Best Buy, Office Depot, Staples etc…. and that list grows longer everyday. Others do Site-to-Store like Walmart & it doesn’t cost you a penny extra. It’s all about Time management for that Savy Consumer as well as other online programs that Reward you with CashBack or Affilate programs or Exclusive Buyers clubs… These people understand the price discrepancies & are totally OK with it as long as they can save money in this economy.
I was upset about the term “Bottom feeders” but ya know Ignorance Is Bliss–As Long as My Friends & I can save some money to spend elsewhere we will enjoy getting More Bang for Our Buck–No matter the “Names” we’re called along the way. Just because Savy Consumers are Frugal it does not mean that they aren’t Loyal. We Are indeed very loyal we just understand the system better & make it work for us and others we share it with. Also Please understand as you may already know that when any item has pretty much the same price across the board incentives like Free Shipping or Email coupons certainly pulls alot of weight with consumers. Other than that Customer Service would be the next deciding factor.
Thank you for the story it is enlightening to see how some vendors & their industry thinks. ;)