Retailers to price match online pricing
Target has announced a policy of price matching online retail prices during the holidays, joining Best Buy in an effort to win back sales from internet retailer Amazon.com. This is only the latest move directed at Amazon.com by Target, which has led brick and mortar retailers in complaining about “showrooming”. Showrooming is the practice by consumers of shopping for products in brick and mortar retailer stores, and then buying online at a lower price. Earlier this year Target removed the Amazon Kindle from its shelves, suggesting an apparent conflict of interest.
According to a recent article in TIME magazine, “Studies have shown that the percentage of shoppers who shop in person and then buy from an online competitor is very small.” Nevertheless, even a small percent of lost sales to Amazon.com during the holiday season can make a big difference, not just to Target but especially to the struggling retailer Best Buy.
Best Buy relies heavily on sales of electronics which makes it particularly vulnerable to showrooming as purchases of electronics have been rapidly shifting to the internet. However, unlike Target, Best Buy cannot amortize its price matches across a large assortment of other merchandise.
Without the hundreds of retail storefronts to support, online retailer Amazon.com has lower overhead, and can afford to sell for less. Nevertheless, Target and Best Buy are calculating that their price matching will be limited, and the additional volume that they get will make up for the profit margin hit they are taking. More importantly, the message that they are sending to customers is that price should no longer be an issue in buying from them since they're willing to match a competitor's price.
While price matching is not new, most retailers have price matched only like competitors refusing to price match online retailers. Though this new move is a bold step, Best Buy does have limitations in their new policy. The policy excludes the critical Black Friday sale period, and sales associates do have the ability to refuse to match offers that are not in Best Buy's interest.
With the Target and Best Buy announcements, it will be interesting to see how this plays out, and if other retailers follow suit.