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[13 comments]

Consumers Find Lowest Prices in Stores

November 14, 2012

Current conventional wisdom holds that prices charged by online merchants are lower than brick & mortar stores due to the disparity in operating costs. While there is truth in overhead comparisons, a new study by Market Track reveals that the best places for consumers to find low prices during the holiday season are in print circulars promoting in-store deals.

The study, which compared prices from the top 50 retailers and e-tailer sites, found that the lowest price was found online only 21 percent of the time while circular prices were lowest 55 percent of the time.

"For all of the attention that showrooming receives, it is interesting that, at least during the holiday shopping season, the most competitive pricing is often found in traditional retailers' print circulars," said Todd Birchenough, chief research officer at Market Track, in a statement.

Paul Salay, president of Market Track, added, "We have seen contradictory information in other research and recent news articles but it should be noted that these studies did not appear to have access to the traditional retailers circular promoted pricing — which is always where these merchants feature their best values."

Discussion Questions:

Are you surprised with research findings that show the lowest prices for the holidays are being found in store circulars and not online? Does the distribution of printed circulars provide the online operations of multi-channel retailers with an edge over pure play e-tailers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How effective a tool are store circulars in getting consumers to purchase from brick and mortar retailers instead of online merchants?

Comments:

To the first question: NO, I'm not surprised.

To the second question: YES. The greatest obstacle to retail advantage discoveries is not ignorance -- it is the illusion of that conventional wisdom is knowledge.

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Gene Hoffman, President/CEO, Corporate Strategies International

I'm not surprised that the sharpest prices can be found in print sale circulars, but I'm not sure that this is the whole story. It's one thing to "lowball" a price on a single item -- especially as a doorbuster for Black Friday and other events -- but it's another thing to compare an overall "market basket" between an online retailer and its bricks-and-mortar competitors. Add the question of sales tax (and whether the e-tailer charges for shipping) and you may end up with a far different picture.

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Dick Seesel, Principal, Retailing In Focus LLC

I don't know that the paper circular is an advantage, but having brick-and-mortar stores certainly can be. If circular deals drive customers in who then put other non-deal items in the basket...that's a win that might be easier to make happen in the physical world. It's all about growing that basket beyond just the screaming deals.

This also makes me wonder when we will see Amazon drop a paper circular for its Black Friday store. While paper circular isn't the medium of the future, it still does drive a lot of sale. Actually, that sounds like a really interesting idea for them to test!

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Jonathan Marek, Senior Vice President, Applied Predictive Technologies

No surprise to me. Retailers are a competitive bunch, so brick and mortar retailers are more than up to a pricing challenge. Think about it ... if prices online were so much cheaper, wouldn't the bottom have already fallen out of the store retailing model?

I think some people forget that running an online business isn't free of costs. We've seen lots of online retailers go bust (maybe even more than brick and mortar retailers), and it wasn't because they weren't selling anything ... it's that they weren't selling enough to cover their very high costs of operations (sounds like the same thing that applies to every retailer). Now that 'free shipping' is looking more like the norm, their competitive edge just got thinner too.

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Kevin Graff, President, Graff Retail

This is the time of the selling year when retailers want customers in the brick & mortar, because shopping online is for specific purchases. It does not allow the customer to walk through the store and see items they did not know they wanted. Specifically the impulse buying items.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

As Dick has pointed out, there is a difference between the price of an item and the total cost of acquisition -- something we work with retailers on constantly. That being said, the consumer's perception is the reality retailers have to work with. The perception is that online pricing will be less.

Unfortunately for the B&N retailers unless the Market Track study gets picked up by the mainstream media it will do little to change that perception. This is another case where a knowledgeable sales staff can alert the customer that buying at their locations is really the best deal.

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Steve Montgomery, President, b2b Solutions, LLC

I'm reminded as I read this of the Toys "R" Us comments that, all things considered, it's far cheaper to sell through brick and mortar than online.

I can't absolutely verify the statement. But online claims far too often are based on apparent logic ("See, it's cheaper because we don't have to rent a store") only to find out the truth is far more complicated. ("Yes, but as one example, you have to maintain an exceptional fulfillment operation, delivering the same level of care to individual consumer purchases that retailers normally save for shipping hundreds of units at a time.")

Internet truth is often stranger than fiction. And my recommendation for everyone (online or offline) is to stop treating them as unique, separate, and competitive channels. To the consumer, it's all one.

Doug Garnett, Founder & CEO, Atomic Direct

The type of advertisements that consumers choose as their primary vehicle (45%) is still the printed circular. Those retailers offering this vehicle will have an edge over those that don't, at first glance.

I think it is great that retailers are finding ways to remain competitive in their physical stores. I just hope their profitability can sustain that competitiveness.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Circulars work for me really well, along with an Institutional Facebook page and plain old networking in my community is the package I have chosen. Yes online is a great tool, but that circular with $1.99lb. hard salami will drive them in every time.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Not a surprise that lower prices for the holidays are being found in store circulars. Retailers need to drive the customer out of the easy chair into the store, and price is a fairly good motivator.

Is the printed circular really an edge? No, an online retailer could just as easily drop one.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Providing the store circular makes it to the consumer (which continues to become a bigger and bigger issue), it's not a surprise that there may be some sharp prices in the circular. And of course if the shopper makes it into the physical store, they might just buy some other items that are not quite as low priced on impulse.

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Brian Numainville, Principal, The Retail Feedback Group

I am not surprised that the lowest prices at holiday are to be found in B&M retailers. There is a lot of planning that goes into holiday advertising and merchandise planning.

It is a complex question as to whether printed circulars provide an edge to the Brick and Mortar retailers. Consider the large number of variables that are in play during a consumers decision to purchase, variables which include time, price, utility, right place/right time, and convenience, to name a few. How those variables are weighted and valued at any given time by a consumer drives their purchase decisions.

Printed circulars which can drive customers in store through hot deals or loss leaders can tip the balance in the weighting of those variables towards immediate purchase of the "deal," but can result in the customer making additional purchases within the traditional retailer. In my opinion, this does give an edge to multi-channel retailers over pure e-tailers.

Charles P. Walsh, President, OmniQuest Resources, Inc

Logically you would think the online price would be lower. Online retailers don't have the store cost and therefore should be able to sell products at a lower price while achieving a higher margin. The issue here is looking at two different market segments. Circulars are delivered via newspapers. The consumers receiving newspapers at home are generally older. Somewhere I read only people 45 years of age and older still read paper newspapers. This helps explain why newspapers are going broke and closing down.

Online shopping is for the most part done by the younger generations. Few retailers put their circular online. They may list a few items, but not all. In pricing studies I have done, food retailers' specials are typically lower in price than Walmart. Each communication channel has both advantages and disadvantages all should be viewed based on the target consumer.

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W. Frank Dell II, CMC, President, Dellmart & Company

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