Unit pricing heads online
Walmart, Costco and four other retailers reached an agreement with New York’s attorney general to list unit prices on their websites and mobile apps for shoppers nationwide within nine months.
The other retailers were CVS, Walgreens, FreshDirect.com and Drugstore.com. Amazon refused to participate.
According to the attorney general’s office, 19 states and the District of Columbia require stores to show unit pricing on consumable items like food, toiletries, over-the-counter medication and pet food. Other states have voluntary guidelines.
Unit pricing helps consumers to quickly compare prices of different items regardless of quantity, manufacturer, packaging size or discounts. The price per ounce (or pound, gram, liter, etc.) is generally displayed next to the retail price.
"As the internet becomes the shopping mall of the 21st century, we need to ensure that consumers have the same robust protections online that they do in brick-and-mortar stores," said Attorney General Eric Schneiderman in a press release.
Some of the six retailers already have unit pricing on some parts of their websites but are further extending the programs.
"Walmart is pleased it could work with the New York attorney general to bring all consumers — in New York and across the U.S. — greater transparency as they shop online," Walmart said in a statement sent to media outlets. "As part of this, Walmart.com is expanding the unit pricing we already offer, in areas like pets and Walmart to Go online grocery, to other categories."
Although Amazon lists unit prices for some items, it doesn’t do so consistently, the attorney general’s office said. Amazon promised to list unit prices for its subsidiary, which runs Diapers.com, Soap.com, and other shopping sites, but did not commit to it in writing, the office added.
Listing unit pricing began arriving in the seventies. Even in states where it’s not required, many stores provide them as a service to customers. Laws and regulations can vary by state, often confusing consumers. Critics say it causes consumers to focus just on quantity rather than quality.
In an update on the effort in 2011, the federal National Institute of Standards and Technology (NIST), which develops standards for unit pricing, pointed to several retailer benefits: improving in-stock conditions; reducing pricing errors; promoting private label products; helping eliminate the need for item pricing; and including stocking and health information.
- A.G. Schneiderman Announces Agreement With Nation’s Leading Retailers To Provide Unit Pricing Online – Attorney General Eric T. Schneiderman
- Amazon gives unit prices for some items, but not consistently, New York’s attorney general says – The Associated Press/The Boston Globe
- Big Retailers Agree to List Unit Prices on Websites – The New York Times (tiered sub.)
- An Overview of Unit Pricing in the United States – National Institute of Standards and Technology
- A Guide to Retail Pricing Laws and Regulations – National Institute of Standards and Technology
Discussion Questions
Is the push for unit pricing online more of a positive or negative for companies engaged in e-commerce? Will retailers that use unit pricing online gain any advantage over those that do not?
For companies who are engaged in e-commerce, it’s one more thing to do. I don’t think shoppers care enough, online, for it to provide an advantage, and I’m not sure how unit pricing in retail provides the benefits NIST states. I am assuming they have done some homework on this, but their presentation just lists these.
This could be a double-edged sword for retailers! On the positive side, this offers transparency to consumers and allows them to shop variety and price. Consumers will like this and it can prove to be an advantage to the retailers who post these unit prices. On the other hand there is complexity in handling zone pricing, TPRs, feature prices etc. That will require both retail and headquarters attention to thousands of details on a weekly, if not daily, basis.
Regardless, consumers will eventually demand this, so retailers who move early may get an advantage.
Posting unit prices may lead to more pricing transparency but only has value if the consumer actually uses it. People buy different sizes for various reasons. The unit price may or may not be a factor in that purchase decision. It may be that certain sizes fit their storage space or that they know they can only eat X-sized container before it goes bad.
P.S. As a college student in Agricultural and Food Economics (basically studying food retailing) in the late sixties I did a unit pricing study. As part of that effort I took a supermarket’s order guide and determined unit pricing for all the items. I found that in many instances the larger sizes were not cheaper per-unit. Since then, information systems have made it possible for every retailer to accurately determine this type of information. Today, unless a size is on sale, I have not seen when a unit price for a larger size of shelf item is not lower for the same item in a smaller size.
Internet is all about data transparency, and either the retailer provides the information or some enterprising start-up/entrepreneur/activist will generate the data. I think consumers will decide based on the situation whether they care about unit pricing, just like they do with any other research data point like calories, ingredients, etc., to help drive their shopping decisions.
Unit pricing is a customer service that gives the consumer another data point with which to make a more informed decision. From a customer service standpoint, it is a positive. After all, sometimes buying the jumbo-sized can isn’t a bargain after all. This requirement does add some (minor) complexity to the e-commerce site, but shouldn’t be too much of a burden.
What this requirement does highlight is the need for retailers, especially of consumer goods products, to find ways to add value and differentiation in service, delivery or product selection, or risk further commoditization of their online product offerings.
“Critics say it causes consumers to focus just on quantity rather than quality.”
Oh please! Au contraire, it allows customers to quickly focus on questions like “is that name brand A really worth twice the price of brand B?” or “How much do I save by buying a bigger size?” (In short, exactly the kinds of questions informed consumers will – and should – ask.) And all the more necessary online, where it’s impossible to hold something in your hand.
But back to the actual question: it will be one more area where competent and resourceful merchants can provide a service, and – as others have noted – it will also be one more area where the careless and incompetent can slip up.
Customers buy products in context. So transparency favors internet retailers on many levels. In particular, it allows retailers to direct sales of specific products by making “great values” painfully obvious. It also adds to the science of pricing and merchandising.
The smartest retailers will discover that transparency will drive margins up—not down.
I would argue that consumers are already doing the math. With retailers like Walmart and Costco agreeing to publish this information, the job of the online consumer becomes easier. Will it also make consumers more loyal to them? Possibly, yes. What would be interesting to see is whether this will have a negative impact on Amazon. Is this a bid by predominantly brick and mortar retailers to take on Amazon and other e-com companies?
It could be another dimension to differentiate for consumer-centric retailers. It will not be easy to manage this, but this is a white space to differentiate today.
Over time, if adopted by leading retailers, this could be become a standard.
As I see it, is just one part of the buying decision. Just because the unit price of ketchup at Walmart is the lowest, I may not change my purchasing behaviour.
So there is a short-term gain that can be had in certain categories, but in the longer term, if this data is deployed intelligently it could help retailers be more consumer-centric.
It could have interesting implications for brands and private-label products.
As a consumer, this is a major plus. Unit pricing is yet another data point consumers can use in their purchasing decisions. The more data points consumers have available to them leads to a heightened sense of insight and transparency into a retailer’s pricing model. The more transparency a retailer provides to its shoppers, the more confidence shoppers will have in their purchasing patterns.
On the flipside, this could really hurt some retailers. Not only does it have the potential to highlight possible flaws in a retailer’s pricing strategy, but since dynamic pricing is so pertinent nowadays, the amount of online upkeep and relevancy can prove to be especially draining of time and resources.
I see this being very effective for those retailers that adopt the approach, and I do see it causing consumer concern and potentially distrust for those that do not.
Price transparency is very quickly going to become “table stakes” for retailers, and the future of being able to get the top 200 to 400 items that almost all consumers buy delivered to your home, at the cheapest possible price, is not too far into the future. Retailers are going to have to focus on their value equation or how they differentiate their banner/brand in order to get shoppers in their stores (physical or online) and make shoppers want to buy from them.