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[21 comments]

Haggling for the Holidays

December 17, 2013

A front-page article in Monday's New York Times detailed how consumers are increasingly engaging in haggling, and store associates are being trained to react to the practice.

Alison Kenny Paul, vice chairman and U.S. retail and distribution leader with Deloitte, told the newspaper that department or floor managers are primarily being given the authority to make deals, but other associates are being coached to "recognize when a consumer needs to negotiate," and "spot the consumer" getting ready to walk out the door.

The haggling comes as smartphones are giving shoppers greater price transparency and many big-box retailers have rolled out price-matching policies in response to showrooming. Target, Best Buy, Staples and Toys "R" Us now match Amazon's prices, according to the Minneapolis Star Tribune.

But the Times article noted that other stores are quietly allowing price-matching, including Bloomingdale's and Nordstrom. A spokeswoman for Nordstrom said in a statement, "For as long as we've been in business we've been committed to offering our customers the best possible prices, including meeting competitor pricing on similar items."

DealScience, a new website that collects, compares and ranks online deals, found that some stores let managers take the extra step of offering 10 percent below a competitor's price.

Beyond price discounts, extended warranties, free delivery, free installation and other add-ons are being offered.

In a RetailWire poll taken in mid-November, only 21 percent of respondents felt retail associates should have greater flexibility in changing pricing terms or offering perks to close sales.

It's not known how many shoppers haggle. Speaking to the Star Tribune, Marshal Cohen, chief industry analyst at NPD, estimated that only about 5 percent of consumers take advantage of price matching.

Of the more than 70 responses to the Times article, the majority frowned on the practice of haggling and price-matching in many cases because of the hassle involved as well as the feeling they're getting continually deceived without fixed prices. Some, including a few independent store owners, felt more widespread haggling would be extremely detrimental to smaller stores that can't absorb smaller margins.

But the Times article quoted several early-adopter hagglers that now claim to continually benefit by no longer making any purchases without at least asking for a better price.

Bargaining "is not adversarial," asserted Marilyn Santiesteban of Newton, MA. "We would both like it if I would walk out of this store having purchased an item."

Discussion Questions:

Under what circumstances should stores be open to haggling? What's driving the practice and how pervasive do you expect it may become in the years ahead?

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:

What's the likelihood that haggling will become fairly common across retail over the next three to five years?

Comments:

Haggling in North America and Europe is a bit new to us, but in Latin America and most of Asia Pacific it is normal to haggle. Price matching is a form of haggling, but real haggling comes into play when shopping using showrooming technology to find a better price and working the sales person to get an even better price. We know some online buying avoids tax, so that becomes a part of haggling too.

Unless training includes everyone in the store and where store associates are commissioned sales, we will not see a lot of haggling. Most consumers are not very comfortable with haggling unless buying a new car, a new home or buying items at a flea market. Maybe we can learn how to haggle as we learned how to use smartphones!

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Frank Riso, Principal, Frank Riso Associates, LLC

These articles, like Glen Close's slasher scenes that appeared in the final scenes of Fatal Attraction, keep popping up at the end of the year. This article on haggling coupled with yesterday's article on Best Buy's "apparent" success at keeping customers by price matching is not a cause for celebration.

Nowhere does anyone talk about sales training as part of customer service, but rather how they essentially play Santa Claus and further discount or throw in freebies to whoever asks.

This is a recipe for disaster for many retailers. I know, I'm in the minority here but giving leeway to all means leeway for your pricing is given away to whoever fills the shift.

If you don't think this is being used to wheel and deal on the sales floor by disempowered employees, you've seen Pollyanna too many times.

Customer service is still the hallmark of brick and mortar retailing. That is predicated on providing the money to train employees how, why and what to do to move the merch out the door at a profit - not simply training how to slash profits and offer extra discounts.

The hard realities of maintaining margins is everyone's responsibility, not some fictional movie.

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Bob Phibbs, President/CEO, The Retail Doctor

Haggling or negotiating with retailers is the new normal for customers. The Internet and social media have leveled the playing field by providing customers with key competitive information, e.g., best prices, terms, buying practices, etc.

In my customer guide, "Winning Customer Rules," I recommend that customers identify what they are willing to negotiate for and what you are willing to trade off.

Further I suggest they do the following: "Speak to a manager or someone who is able to make decisions, but don't try to haggle during a busy time. In addition, be pleasant, mention competitors' prices, and most importantly, educate yourself by knowing what items cost before you walk in the door."

Customers will be prepared and more amenable to haggling or negotiating. Therefore, retailers need to have a strategy, policies, practices and training in place to dignify the customer.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

I recognize the practice of haggling is likely to increase as the number of consumers with competitive price information also increases.

However, retailers that delegate their pricing to sales floor employees should take caution as this practice could create the slippery slope of margin erosion and price integrity issues.

In my mind, there is a difference between "price matching" and allowing your sales associates to haggle. Solid price matching policies, especially for retailers with commodity-type big ticket items, is becoming the norm. Haggling, as I define it, involves providing sales associates a range of price discounts they are empowered to provide, if they believe it is necessary to close the deal.

While consumers typically want the best deal, nothing is more disconcerting to a shopper than to find out they paid more than their neighbor for the same item, in the same store, during the same time period...because they didn't haggle.

Unless we are talking about selling used cars and other very high ticket items, I would generally recommend avoiding the practice of sales floor "haggling," but certainly embrace "price matching" as a posted policy available to all shoppers, whether they are good at haggling or not!

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Mark Heckman, Principal, Mark Heckman Consulting

Slippery slope ahead! Price matching competitors is one thing, but haggling is another. I'm pro educated consumers and web price checking when in a retailer to ensure you aren't overpaying and if you are showing the retailer the phone and asking for a price match. But are we going to set up a new car buying experience in retail where the customer will work the retailer for a better price without regard for competitor pricing? I hear the sound of margin compression....

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

How does haggling interact with the science of price optimization? You may think that it subverts it, but not necessarily. Some of our non-grocery, business-to-business type clients negotiate price as standard practice. An outlet receives a call from a potential customer, asking for a price quote. Our outlet responds, the client may accept, say thank you and not make a purchase, or respond with a counter-offer. What's interesting is that we have the ability to track price quotes, price reductions, and conversion rates. The hope is that this information will give us a basis for a new kind of elasticity (haggle elasticity) that we can build into our demand forecast models and, eventually, create a scientific framework that guides our business in how, and how much, to haggle. Different items definitely have different haggle elasticities.

In Europe, several grocery retailers match basket prices. That is, the item prices within each individual customer basket are summed, and compared to surveyed prices at competitors. If any competitor would have a lower price for this specific basket, the difference is refunded. Haggle-free haggling!

As the article noted, with the increasing presence of social media and instant availability of competitor prices, so-called haggling will become an increasingly important market force. While there will always be a "human" element to haggling, there is no reason that we pricing scientists should not attempt to understand, model, and optimize the process.

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Dr. Paul Helman, Chief Science Officer, KSS Retail

As Frank Riso points out, haggling is considered "normal" for retail in most of China, India, Asia Pacific and Latin America. Haggling is part of their culture and a normal process of shopping.

In the West, particularly the US, consumers have had expectations of set pricing. Retail stores were built and designed to display products at set prices. US consumers have historically accepted "price tags."

2013 has become a tipping point for US retail. "Haggling for the Holidays" has become far more prevalent and expected, primarily due to the growth of online shopping and "showrooming."

Many of the largest US retailers have in fact created the golden opportunity for consumers to haggle ... they have aggressively promoted price matching and price guarantees this holiday season.

Here's the bottom line reality in retail today: the growth and ease of access to online shopping and prices has created price awareness 24/7/365. Retailers can say that they don't negotiate on price, but their consumers are already "haggling" on prices at multiple places/sites before they come to the store.

If retailers only compete on price of the product, online wins hands down. If bricks and mortar retailers are smart, they will view consumer haggling as opportunities to create bundles, sell services and create experiences that can't be sold online, or easily matched on price.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Even in my business we get customers trying to beat us down on all kinds of stuff, and believe me, they'd want it for free if you'd let them. I'm a firm believer in helping out churches and volunteer, non-profit groups for fund raisers, and I do discount where I can, but hold firm on my pricing, which already is extremely low to start with.

Yes, I admit that making a profit is necessary to pay the bills, and I am the only one who has final say on any haggling, which keeps the burden of putting my managers on the spot. It is easier to haggle when your margins are 40-50% on selected items, but not so much on fresh meats, and catering (which is sacred to me).

Bottom line is that I will work with organizations that buy cases of products for their events, and stay focused on keeping my prices as low as possible to avoid constant haggling.

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

I am already an official haggler. To be a good haggler though, it has to be on the right products and at the right time. Hagglers that are good build up a strong dialogue with the sales associate and make items that they want seem like "add-on" sales. That is the point at which you make the pitch. A haggle: "if I get this (main item) and ADD-ON this, can we get it all for 10% less? I hate to go searching the web for a cheaper price..." Then do not talk. Silence kills them and the deal will work. If not, leave the stuff and find it elsewhere (if this is not a shop you are loyal to).

Stores NEED to be open to haggling - but they need to train to expand. Re-haggle. The shopper wants 2 items. Add a 3rd item that you want to sell and then cut the deal. This is a win-win.

Lessons by Redd the Haggler are available for $9. Happy Holiday Haggling!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Haggling has been ingrained in entire cultures around the world for literally centuries. Why are we so afraid to do it with anything other than a car purchases here in the U.S.? And even with car purchases, few Americans are all that good at it.

I pride myself in haggling on virtually every purchase I can infuse a little effort into. This isn't limited to large purchases. Major national retailers will discount if you simply ask them to quite often.

I believe stores need to go for the sale with their shoppers. As long as there is still a profit margin, I think moving tonnage beats losing the sale.

I also think that we Americans will get better and better at haggling now that information about pricing is so ubiquitous.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

There's a subtle difference between haggling and price matching. And without any research to back this, I'd propose that a lot of people don't like to haggle. We have seen backlash from shoppers who can't get the best price without joining the loyalty program. What consequences are looming for retailers who embark on this model in a large scale?

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Dan Raftery, President, Raftery Resource Network Inc.

Small to mid-size retailers and small volume departments at low volume times of the year, with strong, experienced sales associates are the only areas of the store that should even consider this model.

Haggling can be a fun experience, but it's not for the timid. And, seldom can it be effectively implemented in most retail establishments. The vast majority of retailers simply should coach associates, and point out to customers the value proposition that they have to offer - reward points, gift wrapping, choice of merchandise, return policy, etc.

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Roger Saunders, Managing Director, Prosper Business Development

As a consumer, I really dislike purchases where haggling is involved, as I find the whole process slightly demeaning. For retailers, I think haggling with shoppers just accelerates the race to the bottom and the trend towards retailers as flea market operators. Most retailers would be better off carrying as many unique lines and SKUs as possible, and improving their shopping environment.

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Al McClain, CEO, Founder, RetailWire.com

If you actually believe customer haggling can help your business long term, let your associates do it in the store. Otherwise, grin and bear it for the moment and concentrate on finding innovative new magnets for customer response. And who is really driving haggling and what it's leading to:

I took my hard-earned bucks to a store.
Their signs said, "We match all ad prices."
Their prices were set but I wanted more.
I haggled and that started a crises.

"We don't permit haggling in our store,"
Replied the associate rather contritely.
"All folks leave well treated from this floor"
But wonder if that was done brightly.

I left that store and went to shop next door
Filled with shoppers "bent on bargaining"
With their carts fuller and holding more.
Then something dawned on me alarmingly.

Stores are haggling more their competition
Offering hourly gimmicks to extract bucks,
Making we wonder if this repetition
Caused pervasive haggling by their yuks.

"To thy own self be true," retailers and marketers.

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Gene Hoffman, President/CEO, Corporate Strategies International

Haggling over price? We've taught our customers to do this. We agree to price-match. We agree to beat any advertised price. We have literally told our customers to come in and ask for a lower price. So, why are any of us surprised?

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

None. Retail employees are neither trained, nor hardly skilled in positive negotiations, and the tremendous potential for poor customer service and fallout is not worth the risk, aggravation and problems it places on a corporation. Company policy should determine price matching and let our policies manage our customer's expectations and repercussions. Simple, easy and expected.

What is there to haggle for in a Costco or a Walmart? Better prices? These are the low-price leaders in their retail categories and for good reason.

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Kai Clarke, President, Kowa Optimed, Inc.

In the categories that see the most price matching, haggling is indeed becoming more of a norm. I'm thinking electronics, and the big areas for this where there are potentially services that can be added into the haggle. No loyalty. It's all about the price.

Retailers must educate and train their employees in these areas to know what can and can not be offered while still preserving their margins. This is not something that can be opened up to all employees' discretion.

With that said, outside of the areas known for price matching, I do not believe that haggling is very widespread in this country, and not likely to be any time soon.

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Consumers are haggling because smartphones provide them more product information - including competitive pricing - and with that knowledge comes power. If consumers see that it works, there is no incentive to cut back. I'd suggest merchants find a role for their loyalty data in this change. The data can help store employees identify best customers with whom haggling may be most beneficial. The key is to make sure that if you provide preferential treatment, that you start with your most loyal customers, ensuring they are genuinely rewarded for their commitment to your brand.

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Bryan Pearson, President and CEO, LoyaltyOne

It is very dangerous to put pricing power in the hands of retail associates, especially in a world where knowledge of the ability to haggle could spread quickly online. Perhaps some limited ability bounded by rules makes sense in some environments.

This does remind me of a funny story. We have a friend whose mother came from Iran to San Francisco in the late 70s. She was used to bargaining for everything so she'd go to Safeway and start haggling with the cashier that the milk should be half price. She was such a good bargainer, and the cashiers were so flustered, that usually they'd just give her the deal! Her raised-in-America son, on the other hand, was mortified.

The son's anxiety is why this will never take over in the US... we are too self-conscious about it to be hagglers.

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Jonathan Marek, Senior Vice President, Applied Predictive Technologies

Any retailer who allows their staff to haggle had best be ready for some surprises. First, to do so you would definitely need to educate your staff as to how, when, how much, etc. As I continue to tell our clients, "empowerment before education = chaos."

That's only assuming that it is done on the up and up. Unfortunately there will be instances where friends and family get the largest discount as a gift from the store's associate and others where the associate will say I will give you if you give me.

From a consumer perspective, please publish a list of the stores that allow it and let me know what is possible, and I will never pay full retail again.

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Steve Montgomery, President, b2b Solutions, LLC

Giving in to true haggling, if this is not already a part of the retailer's normal shopping experience intention, is the mark of desperation. Price matching is not haggling and is, of course, a natural element of competitive retailing. Haggling is meant for environments where the "retailer" has secured high margin and/or grey market goods, for which sacrificing a bit of margin will not impact necessary operating profits. Finally, the average staff member in American retail, and even their supervisors, will not be able to be adequately trained to effectively and profitably haggle. Bottom line: Stick to price matching and avoid getting into the trap of "acceptable haggling."

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

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