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[34 comments]

Walmart won't compete with Walmart.com

July 15, 2014

This is a tale of two shoppers: one who came away happy (me) and the other, a columnist who was befuddled by his experience and wrote about it on the Atlanta Journal-Constitution site as well as others.

Here's how my experience went:

  1. I needed a toner for my printer so I searched for a good price online.
  2. Finding a good price I went to a nearby Staples to pick up the item.
  3. In the store, I easily found the toner, but realized the in-store price was higher than online.
  4. I went to the checkout, showed the cashier the company's price online and paid the lower price.
  5. I was happy.

Here's how Clark Howard's experience went:

  1. He went online to find a Lego set for his son. Walmart.com had the best price.
  2. Entering a nearby Walmart store, he found the item on the shelf, but the price was 35 percent higher than on Walmart.com.
  3. He found an employee to show him the online price and was told the store would not match the Walmart.com price.
  4. Because the store would not match the online price, he went online and ordered the item for pickup at the same store.
  5. Although he saw an employee take the item he ordered from the shelf to set it aside for pickup, he found he wouldn't be able to take it home until the next day because he didn't have his confirmation notice yet.
  6. He was unhappy.

According to Walmart's Pricing FAQ, "The merchandise and prices available on our website do not reflect the merchandise and prices available in our stores. Our stores will not match prices with our online store (or other online stores) because we do not consider them to be in competition with our retail stores."

A RetailWire request to Walmart's media relations department for comment had not been answered at the time of publication.

FINANCIALS:     [NYSE:WMT] [ NASDAQ:SPLS]

Discussion Questions:

Are there good reasons why a retailer should refuse to match its own online pricing in its stores? What do you think is behind Walmart's policy?

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 do you feel about Walmart's policy of not matching its online prices in stores?

Comments:

Bravo for Walmart for some common sense and a strategy for the future.

Websites have to be competitive with the best e-commerce sites, and increasingly those e-commerce sites are competing on prices worldwide. It is not uncommon for Amazon to make thousands of price changes per hour.

Very simply put, e-commerce has a different business model than retail stores. Retail stores cannot pay for space and people if they sell everything at online prices.

Retail stores must do two things to survive. First and foremost, they must create a consumer experience and value for shoppers who come to stores. Second, they need to clearly explain that there is a different price for products on the store shelf that you can immediately take home and enjoy.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

The policy seems to answer the question. Stores cannot access inventory or price information from their online store, so they cannot better coordinate the shopping experience. It seems suboptimal given all the mindshare for what omnichannel means to retail and how consumers who shop across channels don't care about silos, they just expect a smooth shopping experience. It sounds like some integration work and business process changes are in order.

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Gib Bassett, Global Program Director for Consumer Goods, Teradata Corp.

There are good reasons for why the company would not want to match its online pricing, but none of them are good for customer service. They should have sucked it up and given it to him for that price.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

 
10

It is hubris on the part of Walmart to think they can defy what shoppers want and believe they can expect. When sales get soft this will change, just as their last bout of hubris regarding data sharing with Nielsen, IRI, and NPD changed.

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Joel Rubinson, President, Rubinson Partners, Inc.

Retailers may have their reasons for not matching their own online prices, but to consumers those reasons don't make any sense. Whether it's Walmart, Gap, Target or other stores, all these policies serve to do is make consumers mad. Retailers should do a better job of explaining the practice or drop it.

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Max Goldberg, President, Max Goldberg & Associates

Walmart will learn overtime that it cannot manage its inventory with two different pricing models when using their stores as pick-up and return centers. The consumer knows only Walmart and not Walmart stores vs. Walmart.com. It has taken at least 10 years for retailers to realize that the consumer only knows the brand and not the channel. Walmart will learn, just give them time to reflect on it.

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Frank Riso, Principal, Frank Riso Associates, LLC

That's just so wrong. I found a similar story about Best Buy several years ago, but the customer was happy because he used a price comparison app (RedLaser), found it on Bestbuy.com for a lower price, ordered it through his phone for in-store pick-up and thought he'd really scored.

Retailers may have "good reasons" for charging different prices online vs. in-store, (more payroll, rent, yada yada yada) but it doesn't make a whit of difference to the customer.

Once I got beyond the laugh (somehow it struck me as really funny that a retailer would even contemplate this in 2014), I moved on to shock. Data from our pricing benchmark showed that retail winners (over-performers on sales) must be consistent across channels, but they do OK with channel-specific promotions.

I don't know how to reconcile that, but to have price disparity as a matter of course and corporate policy is a bit beyond me. Especially when a company is trying to regain lost market share.

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Paula Rosenblum, Managing Partner, RSR Research

Not that I can think of, given the price transparency that is now available via the Internet. Walmart is trying to arbitrage between online and offline assuming people buying offline aren't doing much, if any, research online.

Not a great example of omnichannel retailing, and Walmart will either learn to better meet customer expectations or have unhappy customers. Not surprised that Walmart's media relations department had not commented by the time this was published.

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Bill Davis, Director, MB&G Consulting

Some retailers are just starting to build an online presence, and consider special pricing (effecting a lower price than physical store—more often as online only coupons, free shipping, etc.) as means to build share.

From a customer perspective, none of the arguments of different prices, inability to view inventory, access by store personnel or by website, etc., matter. They only aggravate the situation.

To all retailers: welcome to the 21st century! "Retail ain't what it used to be and never will be again."

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

It's a horrible policy. These aren't two different retailers; it's all Walmart! The different overhead/costs/etc., of different channels are irrelevant to the consumer. If you were standing in the store, would you expect to pay a different price because your cashier made a higher salary, while the cashier in the next lane charged less because she earned less?

It's particularly tragic because it's so out-of-brand for Walmart ("Always Low Prices"). In this world of perfect information and complete pricing transparency, consumers will know they aren't getting the best price from Walmart and will always have to fear that they should be getting a better price (exactly what Walmart doesn't want).

Most ironically of all, Walmart offers the savingscatcher.walmart.com utility which is intended to eliminate the shopper's fear that he or she is not getting the best price, when in fact it doesn't even give you Walmart's best price.

Walmart has made so much progress in breaking down silos and unlocking all their inventory for all their shoppers, this is an enormous step backwards.

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Jason Goldberg, VP Commerce Strategy, Razorfish

 
13

No, there is no good reason. There is a brand commitment involved here, and if the name is the same online and in stores then consistency is called for. Strangely enough, despite all the work that was done on "zone-level pricing" to maximize margin, as Paula indicates the world is going back to consistent cross-channel pricing.

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Peter J. Charness, SVP America, Global CMO, TXT Group

This example is a classic one of lack of coordination between online and offline channels. Walmart does not have an online and a retail customer—they have one customer who is more and more comfortable shifting between channels. Over time, such a disorganized strategy will cost the company share and credibility.

Also, if Walmart does not think that they are in competition with online providers, maybe they should talk to Best Buy, who has regained share and momentum by matching prices across channels.

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Mark Price, Managing Partner, M Squared Group, Inc.

Answer to the first question is NO.

Answer to question number two is BEFUDDLEMENT—and proves zone pricing exists.

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Gene Hoffman, President/CEO, Corporate Strategies International

I have been a Walmart fan for years. Most everything they do has been right. My assessment was that they understood their business as a business rather than as a retailer. But, this story is truly bizarre.

Gordon Bethune wrote a great book, "From Worst to First," about the turnaround at Continental Airlines. His turnaround emphasized two things. 1.) Our problem is not the customer's problem. Take care of the customer. 2.) Give people on the firing line the ability to make rational, logical decisions. In this case, Walmart breaks both those rules.

The thinking that products should cost more in a store because a store has costs that online doesn't, will take every retailer back to the stone age (pre-omnichannel). The cost of operating a store is overhead. It has nothing to do with the price or margin of the merchandise. The objective of the company is to sell merchandise and garner the contribution from that merchandise to support the business. It makes no difference where the merchandise is sold or for what price. The store costs do not change.

The example given in the discussion proves it. There was no change in cost of operating the store because they forced the customer to purchase it online. That is, other than risk the situation that the customer will never buy anything at Walmart again.

Frankly, I would fire whoever instituted this backwards policy.

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Gene Detroyer, Professor, Independent

If the scenario was slightly different and Clark was going to purchase from a competitor to Walmart.com at the Walmart.com price, wouldn't it have been better to match the price in-store and take the sale for the larger Walmart, instead of allowing the sale to go to a competitor? Consumers don't see a difference between Walmart.com and Walmart, and unhappy interactions on either affect loyalty and the perception of both.

James Fong, Product Manager, IBM WebSphere Commerce, IBM Canada

I haven't heard a single person mention the glaringly obvious thing about this scenario: the Lego set that Clark would ultimately pick up, for 35 percent less than the in-store price simply because it was ordered online, was the very same one that the employee took from the shelf of the store. Somehow, a one-day delay (which is NOTHING more than an inconvenience for the customer) is being used as the justification for charging 35 percent less for the same Lego set.

There was no magic, less-expensive Lego set coming from a Walmart DC to Clark's local store, the next day. Lego is not selling identical sets but under two different SKUs, at two different price points, to Walmart (thereby somehow cost-justifying a one day delay in allowing Clark to purchase it). It's the SAME Lego set as the one sitting on the shelf. This is absolutely nuts. Poor, poor customer service. If cost savings were the driver, Walmart would require online sales to be shipped directly to the consumer, at the consumer's expense.

Laura Brown, PRESIDENT/CEO, EXCELLENT DOG ENTERPRISES LLC

I have published a significant amount of content on this very topic. I've spent the better part of 15 years working with retailers on their pricing strategies and I will confess, there's a lot of swirl on this topic.

The leading and winning strategy for retail today is to have systems that allow for all types of pricing strategies with a practice of understanding consumer demand. Given this understanding, retailers should price online and in the stores based on consumer price elasticity, competitive threats and overall pricing strategy. Consumers behave differently in the stores as compared to the same consumer online. Price elasticity differs by channel for the same item and the same customer. Further, if a customer requests a price match, the company must have a clear policy that all understand and an approach to address customer issues, should one develop.

Blindly setting the store and online price simply is not feasible. Consider Walmart's conditions. One of their key competitors is Amazon. Amazon makes 3 million price changes per day. If Walmart were to have the same published price online as they do the stores, they would do nothing but run around the stores all day, changing prices to remain in-sync with their online business and to avoid competitive issues online.

For Walmart, the cost of doing business online is different than the costs of doing business in the store. Further, they have different competitors and different customers. For example, almost 30 percent of store transactions are tendered with cash, whereas all transactions online use traceable tender (not cash). The differences extend far beyond the form of payment.

Walmart is doing exactly what they should do. They are setting strategic pricing based on competitive threats by channel and utilizing elasticity to understand consumer behaviors. They have also set a policy of price matching. This policy is clearly stated on their website. Given all of this, there will be customers that are not satisfied. If there is anything that Walmart should do, they should make sure they have a reasonable resolution to customer issues as they arise. Answering "no" is not a great way to treat a customer today.

Customers expect to hear "yes" and "now" on just about everything they request. If a retailer is unable to offer either answer, they risk opening the door to their competition.

Kevin Sterneckert, CMO, OrderDynamics

There is no good reason not to match online pricing. Walmart's policy is due to a lack of understanding of the customer base they wish they had. Walmart is used to dealing with the uneducated and unconcerned. They do not have a plan to deal with customers with questions. Walmart has been focused on the bottom tier of the shopping world for so long that they actually think they can do no wrong (if they think at all). Walmart is like a freight train with a full head of steam—they are gong to go down that track until the steam runs out. Same thing happened to Kmart.

When a behemoth like Walmart cannot correct it's out of stock problems after years of neglect or indifference, then I wonder if there is any hope. I have, however, found unbelievable bargains on Walmart.com and in most cases have elected to have them delivered for a very small fee to avoid the time, cost and hassle of picking the items up. The fact that ANY Walmart.com order can be returned to your local store for immediate refund or credit is also a great advantage.

Remember, the purpose of Walmart.com is to capture customers that probably wouldn't venture into a Walmart otherwise. With this in mind, I understand why Walmart won't match it's own online pricing. I don't approve, I just understand!

Ed Dennis, Sales, Dennis Enterprises

There are no good reasons for the shopper, and it is all about the shopper.

David Lubert, Industry Principal, Bridge-x Technologies

We're definitely seeing some growing pains as new models emerge for retailers to figure out how to do omnichannel. The problem here is that positioning the stores as being in competition with the website seems entirely bizarre, and that message will likely change.

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

Consumers understand nothing about the costs of doing business and how they are applied to a company's inventory. Consumers are in no way seeking to be educated in these things. Companies that provide parallel sales efforts with the same name and physical locations must keep this in mind or face ownership of derogatory word of mouth commentary from the general populace. As we are witnessing with Sears and Kmart; no retailer, regardless of size and time in business, is to big to fail when approaching the market with any amount of contempt or arrogance for the uniformed consumer.

'gjarnoldjr'

Regardless of the "we will not compete against ourself" argument put forth by Walmart, consumers see Walmart.com, Walmart Express, Walmart-to-Go, et al as Walmart the giant retailer in Arkansas. Pricing, products, service, delivery differences between the Walmart entities will befuddle shoppers. Congratulations, Walmart, on creating a powerful brand across your ommi-channel entities. Lots of positives for the retailer, and a few complications they will have to work out—or risk disappointing customers.

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Larry Negrich, Vice President, Marketing, nGage Labs

As everyone here seems to agree, there are likely "good" reasons in that they have accounting or some other kind of numbers behind them, but they are never good enough to the people who make the final decision...the customer (and in this case the size of the disparity is startling: a few percent probably wouldn't have attracted much attention).

So the real question then involves other numbers: how many customers are likely to be upset by this, and is it worth losing their business? Much like return policies, store hours and other tradeoffs, this is something only the individual retailer—in this case Walmart—can answer.

'notcom'

I can understand a pricing difference between in-store and online. What I can't understand is why the difference would be as high as the 35% mentioned. Why would anyone in their right mind pay a difference of that much for anything?

I don't think this is something only Walmart does. But I guess customer service is something in words only. No way can they convince a customer walking in the store armed with the online pricing that they have to pay a 35% differential or return tomorrow to pick up an item you watch the clerk take off the shelf to hold because of some non-sensible policy. They can't possibly think we will spend more by returning angry tomorrow.

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

Should is not the correct term because this is a strategic choice with no right or wrong approach. Because of overhead costs, an argument could be made for higher prices in the store and that creates a great environment for showrooming. It is certainly a retailer's choice for what approach they take. However, most consumers consider the retailer to be one store - whether in store, online, or through a call center. Consumers are not pleased when they have to think about one retailer as three stores! They may choose to go to another retailer that they do not think is playing games with them.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

The lines between online and offline shopping are increasingly merging as consumers seamlessly move from channel to channel.

Today's omnichannel shopper is using a variety of channels to browse, research and purchase a product. They might use stores as showrooms, purchase online and then receive delivery information via mobile—but they see only a single brand and expect a single, seamless experience.

With shoppers increasingly demanding pricing to be the same regardless of whether the product is purchased in-store, online or via mobile, retailers must therefore ensure they deliver parity pricing across all channels to provide a consistent shopping experience. It makes no sense for a retailer not to match its own online pricing in-store: shoppers are motivated by price and will inevitably buy from a store which delivers the best value.

Jannie Cahill, Chief Marketing Officer, Profitero

Quick answers:

1. NO!
2. Company policies that haven't yet reacted to shoppers needs.

Retailers who will succeed in the future, and I believe Walmart will be one of them, will have to realize two key facts:

  1. For a shopper, Walmart is Walmart, regardless of purchase and delivery "channel." As others have said often, including Paula Rosenblum and RSR Research, channels just don't exist in the mind of the shopper.
  2. For a retailer, they can't afford to treat the same shopper as two different entities, an "in-store" shopper and an "online" shopper or they will lose. Market arbitrage always happens when there are different prices, shoppers have the information and tools to be an arbiter.

Finally, retailers will be forced to provide consistent pricing to a shopper to remain competitive. That being said, retailers do have the information and tools to be able to provide different pricing to different shoppers to up their competitive value should they chose to do so.

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Verlin Youd, Principal, VPY LLC

Walmart stores and Walmart online seem to be operating as different entities with different business models and cost structures, hence they refuse to match prices. Walmart wants to be a part of the growing internet retail play, but the customer sees them as one leading to dissatisfaction on denial of the online offer. To avoid increasing incidents of customer dissatisfaction and still be a part of the web retail space they need to operate as a different brand retaining a sign off of Walmart group. This will help Walmart to transfer many strengths of the Walmart brand to the online brand at the same reduce incidence of customer dissatisfaction.

Girish Bapat, Managing Partner, Vistas Consulting

I get the price difference; it's the "clicks vs. bricks" argument. Expenses are many times higher for bricks than clicks. But Walmart is leaving "Goodwill" out of its mathematical equation and the negative press will cost them more than whatever they hope to make on the two-tier price policy.

Kelly Cochran, Retail Leasing Malls, Moonbeam Capital Investment, LLC.

The reasons pricing is not transparent at a Walmart vs walmart.com are likely for inventory management and other operational reasons—not consumer-driven reasons. Walmart is battling to stay competitive, this strategy will only cost them more customers in the end.

Yesterday, RetailWire discussed Best Buy's turnaround, to a clear focus on consumer experience. BBY had inconsistent pricing online vs in-store vs advertising—eventually eroding trust and placed in-store staff in a defensive posture over company policy. Correcting this error moved the customer experience forward, allowing staff to be helpful and shoppers feeling like they are getting a fair deal.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

My take on this is simple. One of the ways that Best Buy has been able to survive "showrooming" is by guaranteeing they would match prices. Now, one of the recognized low-priced retailers in the industry won't match its own online pricing. And, in the situation described in the article, it's obvious they their policy becomes a customer inconvenience.

In the arena where just about the only thing that can differentiate certain stores is price, it surprises me that Walmart won't match their own prices. But, maybe they want to do this on purpose. Maybe this is a plan, and possibly a good one at that. Maybe they want the customer to go online—and this is a way to train them. Just like the airlines wanted customers to use online booking by offering an incentive, maybe Walmart wants customers to buy online, thereby creating an operational savings; employees, inventory, etc. Could be genius. We'll find out sometime soon, I'm sure!

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Having different pricing by channel or exact same product/service goes completely against the omni-channel philosophy that Walmart is trying to embrace. To a customer, both Walmart.com and Walmart store are still Walmart, and how can customer trust every day low prices when the prices are not competitive across their own channels.

Walmart is trying to change from channel-centric organization (by cross-channel fulfillment options such as buy online pick up in-store), however, the company has left some blind spots in the process that are evidently visible to the customer—and annoying.

Anurag Rohatgi, Director, Omnichannel Solutions, SCA llc

The article itself seems to answer the question. If Clark wanted the Lego set immediately, then Walmart's store was offering a service that Clark needed which walmart.com could not, and doing so by bearing a higher cost (distribution, rent, utilities, etc). It seems perfectly reasonable that Clark should be asked to pay for some of these additional costs that he so values. The fact that that adds up to 35% more on some items and only 5% (or less) on others is a matter of strategy for Walmart and no doubt reflects relative demand for the items.

Staples is applying the same strategy. The fact that they are willing to flex that strategy when requested is either good customer service or a lack of strategic conviction, depending on your perspective.

Rambaut Fairley, Associate Partner, OC&C Strategy Consultants

Customers care about getting a good price, but they also need to feel they can trust the brand. We can say all we like about Walmart having a strategic pricing policy, but are they doing the right thing? Are their shoppers going to intellectualize the experience and come to an understanding that Walmart is making a smart business decision, or are they going to feel that they were misled, and thereby lose trust in the Walmart brand?

Numerous research reports have shown that shoppers showroom and webroom, and that the behavior is increasing. In fact, as we have stated on numerous occasions, for millennials do not call it "showrooming" and "webrooming"; they call it "shopping". Consistent pricing between the website and in-store may not be the most profitable approach on individual items in the immediate term, but I know what I expect and how I want to be treated as a shopper.

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Alexander Rink, CEO, 360pi

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