Photo: Walmart
Walmart’s online prices drive customers to its supercenters
Walmart, as Marc Lore, head of the retailer’s U.S. e-commerce operations, has noted, has a “maniacal focus” on its customers and “finding ways to offer them low prices — every day.” For shoppers on walmart.com, that focus means being able to find prices that are increasingly in line with Amazon.com.
Earlier this year, Walmart added another benefit for price-conscious shoppers by offering discounts on items ordered online and picked up in stores. The “Pickup Discount” is typically between three and five percent.
A recent Wall Street Journal report, citing unnamed sources, says Walmart has begun raising some online prices and adding in-store price tags next to items on its site so shoppers can see the comparison. The intent is to drive traffic to stores, whether that means click and collect transactions or shoppers skipping online orders and heading out to their nearest supercenter.
In the end, getting more shoppers to stores means higher profits for Walmart as it reduces the expense associated with home delivery. The retailer offers free two-day delivery on purchases of $35 or more.
“We always work to offer the best price online relative to other sites,” a Walmart spokesperson told the Journal. “It simply costs less to sell some items in stores. Customers can access those store prices online when they choose to pick up the item in store.”
Recently released research from Profitero shows that Walmart has cut the price gap with Amazon in recent years. In 2014, Walmart’s online prices were nine percent higher on average than Amazon. In its most recent comparison, the ecommerce analytics firm found that the difference had shrunk to under three percent. Walmart has lower prices than Amazon in categories including beauty, where it went from being 10 percent higher to one percent lower than its larger online rival.
For its part, Amazon appears set to compete on price through the holidays. It was recently reported that the e-tail giant has been lowering prices on items in key categories and displaying a “Discount provided by Amazon” tag.
- Now Featured on Wal-Mart’s Website: Higher Prices Than Stores – The Wall Street Journal
- Amazon undercuts rivals by adding discounts to marketplace seller prices – RetailWire
- Will an in-store pickup discount give Walmart an edge over Amazon? – RetailWire
- Amazon undercuts rivals by adding discounts to marketplace seller prices – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you see the comparison of online and in-store pricing on walmart.com helping to differentiate Walmart from Amazon? What will be the net effect of this action? Do you expect other retailers, perhaps even Amazon with Whole Foods, to follow Walmart’s lead by showing two sets of prices?
Poll
BrainTrust
Kiri Masters
Founder and CEO, Bobsled Marketing
Jackie Breen
VP of Strategic Growth, Deck Commerce
Walmart needed to and substantially has closed the online pricing gap with Amazon. Overall, I’m not sure this alone will change the landscape much. However, I do believe that Walmart is smart to play to their brick-and-mortar strength by offering even lower prices for in-store pickup on some items and then play for add-on sales from the increased store visits.
While this move may differentiate Walmart from Amazon, it does not do so in a way that Walmart wants. This move sends confusing signals to Walmart.com’s growing base of customers, and it seems counter to so much of what Marc Lore has aimed to accomplish.
It’s maddening for consumers to see one price on a retailer’s website and another in its stores. How can Walmart claim to be the low price leader when it beats its own prices? This move does not fit its brand message. Amazon will not sit still — look for further price cuts as it races Walmart to the lowest price.
While there is a large segment of Amazon’s customer in particular who are focused on convenience and not price, I’d wager that Walmart’s customers are skewed in the opposite direction.
I see this pricing comparison engine helping consumers to realize that some products are cost-prohibitive to ship. Unlike Amazon, Walmart is not prepared to lose their shirt by shipping a $4 tube of toothpaste to a customer. The real deal-seekers will discover that Walmart’s in-store prices are cheaper than Amazon in some cases. I do see this pricing comparison engine helping consumers to realize that some products are cost-prohibitive to ship, and start to re-shape their buying behaviors accordingly.
Sooner or later the economics of shipping low-value items individually must be recognized. Amazon has and is moving to fix the economics. Amazon is moving to marginalize the $4 toothpaste and other low-priced items by raising their fees and limiting access to certain programs. Their effort is to promote bundling (four tubes or more) to secure sufficient fees to cover their costs. Walmart has many other options and the one they’ve chosen is transparent and a smart use of the competitive advantage of a terribly efficient warehouse-to-store supply chain with brick-and-mortar locations near virtually every consumer.
I (the consumer) don’t want two sets of prices. I have a lot of details in my life, keeping track of more price points isn’t one of them.
While I’m not the definitive voice of the consumer (far from it) Most consumers are going to feel this way.
This feels counter intuitive — one set of prices and better experiential will drive people to store. Online/mobile is rising, not declining. We talked about this, Walmart!
Hopefully what happens is that other retailers will go the other way. Stop using pricing as a driver — the consumer is on to you. Leverage your real estate to your advantage — make your in-store experience unique so people will want to come to store (not come there because they don’t have another choice).
Walmart is achieving two results by offering 3 percent to 5 percent savings for online orders that are picked up in-store. First the obvious result of saving of shipping costs but, more strategically, once your customer is in the store, there is a high likelihood that they’ll purchase more items. The capability to offer a seamless and valued experience throughout the process is critical.
I am not convinced this makes much sense at all. With Walmart’s powerful supply chain and logistics, it would seem that they should be able to be the price leader online as they are in physical stores.
In the long run, it will cause more confusion with customers and eliminate those who don’t want to go to the stores.
I doubt this strategy to offer lower price for pickup will work. The real winners will be those truly omnichannel; the experience should be the same no matter which avenue I take and with things like personalization and predictive modeling, omnichannel wins if you get the customer loyalty to start with.
Price is not a loyalty factor, it’s a convenience to the purchase. Bifurcating online and pickup pricing just means you are training someone never to enter the store but yet buy online, rather than augmenting the online with the store — two totally different scenarios.
Providing a cheaper price or a discount for picking up an online order in-store makes sense — after all, it is cheaper for Walmart to fulfill in this way and it gets the potential benefit of incremental sales when the customer collects.
However, simply elevating online prices over store prices doesn’t seem sensible. It will create confusion and resentment, adds complexity and does not allow Walmart to compete as effectively against the might of Amazon.
Of course, the bottom line is under pressure and investors don’t like it. But Walmart needs to take a leaf out of Amazon’s book and investors need to accept that lower profit is the price of long-term success.
This is a winning strategy from my perspective. Too many traditional, established retailers are pursuing a digital-first strategy; seeing their physical stores as a legacy business which they’re trying to run away from. From their perspective, the more people they can shift to online, the better.
If they continue down that road they’ll eventually look like an “Amazon Lite” — not able to compete with Amazon’s highly-developed global supply chain and finding it impossible to match their costs. Older retailers’ competitive advantage is their physical footprint. Embrace it. Persuade customers to use physical stores.
Walmart is showing the type of leadership that is required to succeed.
It is smart of Walmart to focus on a key differentiator by getting more shoppers into their stores. There is a Walmart within a few miles of just about everyone’s house. So going into the store for a pickup is easy for most people. It is smart of them because 58 percent of shoppers will buy more goods when in-store for a pickup. Better yet, it “means higher profits for Walmart as it reduces the expense associated with home delivery.” More than just focusing on the online price comparisons, Walmart needs to focus even more efforts on Amazon’s weak spot … the physical presence. They are still NOT there yet. Take advantage of it while you can (Walmart … and ALL other retailers)!
Walmart is doing everything they can to make the shopping experience easier for their customers and is putting in place another innovative differentiator. The question is, how many options are too many for the consumer?
While passing along the shipping savings to the consumer is great in theory, offering multiple prices on the site is confusing. On walmart.com consumers now have three different prices to consider: “Buy Online” price, “Buy Online Pick Up in Store (with a discount)” price, or “Buy in Store” price. It all comes down to what the customer is willing to pay for convenience and Walmart is essentially putting a price tag on that.
No I don’t. It is a glaring self-interest move by Walmart. The effect is so transparent (getting more traffic to the stores) that eventually customers who shop online solely for convenience will find it irritating.
Right now Walmart does not care. Soon they will be forced to do so. They are not just competing with brick-and-mortar Walmart(s), they are competing with online as a category. Shoppers EXPECT online to be cheaper and it should be.
I just can’t help but go back to the typical, before Marc Lore, Walmart customer. What Marc is doing for Walmart is phenomenal and I believe is helping to bring new customers to Walmart. However the traditional Walmart customer has expected the lowest prices at their convenient Walmart store and many are not big online shoppers. So, IMHO, Walmart is very smart to offer the lowest prices in-store and keep that steady customer happy. For my 2 cents.
I do love a good in-store foot traffic strategy. We all know Walmart’s differentiation from Amazon is that it has a massive physical presence and can use that to its advantage, but beyond that constant conversation, I’m interested in the social science behind this experiment. I agree with Kiri: Showing two prices is transparent and informative, not confusing. It gives the customer agency over what convenience means to them on a given day, and options are powerful. It also gives Walmart the benefit of having customers enter their physical store already understanding (down to the cent!) the value of their visit. At this moment I can’t think of another retailer who could tell me that precise amount. I would be delighted to see other retailers experiment with a similar “maniacal focus” on leveraging their brick-and-mortar stores and pricing strategies for a better cross-channel customer experience.
I’m not convinced that this will effectively shrink the significant online market share gap between Walmart and Amazon. First, Amazon is not about to surrender its low price perception. Second, Walmart’s dual pricing may confuse and even turn away some customers. Third, the Walmart pickup in-store experience needs to be seamless, which is not yet the case. In this battle of retail heavyweights, my wager is on Amazon.
In some sense this approach constitutes a dialog with customers. Walmart is not hiding its price differences. It’s sharing the strategy and rationale with customers so that it becomes their choice to buy in the store or online. Instead of traveling between one website and another shoppers may toggle between the Walmart’s store and its website.
Getting people into the store offers Walmart another revenue opportunity while helping reinforce the “deal” consumers receive. I don’t think other retailers could pull it off as well as Walmart, because others’ price points and diversity of inventory don’t have the same legacy.
Online pricing is still in its infancy as retailers are trying to figure out the optimal price to charge and build out the omnichannel experience. Last week Jewel-Osco announced they would have the same prices as online as in-store, this week Walmart goes in the opposite direction.
The two-price strategy should encourage shoppers to visit the store but at a cost as it will add an extra layer of complexity to Walmart’s pricing strategy.
Moving forward it will be a challenge for other retailers to support two prices with their limited resources.
Though it seems counter-intuitive, the online vs. in-store pricing transparency makes practical sense, ideally driving more customers into Walmart stores, either for items priced less in-store or to take advantage of the savings offered through buy online pickup in-store. The potential downside surfaces should consumers adopt the perception of Walmart’s online pricing being higher than Amazon and higher in general. For those where convenience outweighs price, Walmart may unintentionally drive away online sales.
Looks like Walmart is educating their customers on how to get the customer the best price by creating a hybrid buying experience. The retailer that can get the consumer to buy from them, both online and on-site, will win. Showing shoppers in the store how to get best prices by shopping online and picking up while they are in-store may prove to be the way to compete against other online retailers (such as Amazon). Walmart is working to build more than market share. They also are building wallet share (How much of an individual’s retail spend is with Walmart?).
Walmart’s pricing does not drive customers to its supercenters. Instead, it just encourages consumers to “shop” at another online competitor. Why would I buy from Walmart.com and pay more than Amazon? Just so I could save the difference when I make the drive to my local Walmart? This is the most absurd logic I have heard in a long time. Walmart needs to understand the true retail cost of not having the best price (whatever happened to ELP?) in the online environment.
Walmart lowering prices for in-store pickup does distinguish itself from Amazon in a way that Amazon cannot match. Consumers will not be confused as they would expect lower prices for having provided part of the delivery service. This will encourage some consumers to shop at walmart.com and pick up their item on the same day. Other retailers may follow suit, but it is more important for Walmart to do two-tier pricing as they position themselves as a low-cost leader.
From an online perspective, Amazon is absolutely Walmart’s biggest competitor. According to industry studies, more than 50% of consumers start their product searches on Amazon. Walmart would like consumers to think of Walmart.com as their product search starting point. Therefore, highlighting special price discounts for items picked up in the store (avoiding shipping costs) that are just as competitive or lower than Amazon’s prices is a smart strategy.
The other huge benefit of steering customers to BOPIS purchases is the bump on in-store add-on sales driven by the number of customers that purchased online and picked up in the store. When the customers visit the store to pick up their online purchases they are likely to purchase additional impulse items while they are there.
Walmart’s Mobile Express Returns program that enables customers to efficiently return online ordered products at the store is another tool to bring customers into their stores. With 90 percent of the U.S. population living within 10 miles of a Walmart store, it is their biggest competitive advantage over Amazon.
I wouldn’t be surprised if other retailers follow Walmart’s lead on the dual prices showing the cost savings for picking-up online ordered items in the store. It is just another arrow in the quiver of Brick and Mortar to fend off online pure play.
I think this is just the next step in the evolution of pricing strategy. If we think of Prime as a way to gather loyalty while not being firstly concerned with price, then this may be Walmart’s approach to same. A little counter-intuitive but it could ultimately be a path to personalized pricing without the loyalty card. If we think of Jet.com’s strategy, it was to beat the price at basket level rather than product level, this may be a step to test out strategies like this.
I think many in this discussion mistakenly think there will be two prices on ALL items? But Kiri got it right: It’s the difference between a trundle-bed and toothpaste. Furniture and fennel. I recently ordered “mattress in a box” and understandably picked it up at the nearest Walmart. The price was reflected on the final receipt, no confusion at all.
I see this two different ways. First, getting shoppers in-store is a big plus because they’re likely to remember that they’re out of paper towels or be enticed by a display for a new product they’ve never tried. These add-on items are valuable. However, what if shoppers don’t have the time or ability to get to a store? This could be cast in a negative light as Amazon lowers prices on a number of items this holiday season. As long as Walmart relies heavily on price monitoring and dynamic pricing to ensure they aren’t out-done by Amazon, this plan could be successful. But if a shopper is pressed for time and sees that the item is priced higher online, they might just hop over to Amazon or another site to see if they can get it for cheaper. On one side, this could lower shipping costs and boost basket sizes for Walmart. But on the other, it could erode trust and Walmart’s image as a loss leader.
Walmart’s brand promise and core consumers are both about low price. I’m not certain if Walmart needs to differentiate beyond low price. While Amazon and Walmart share customers, the two businesses are in different retail spaces.
Two sets of prices will help consumers decide whether or not they want to venture out to the store for one or two items and it will reduce the logistical factors and overhead costs of home delivery for the retailer.
I see Walmart as being better positioned to gain market share than their prime rivals. The reason — the advantage of extensive store presence and pricing, in combination with their successful transition to the omnichannel model. However, the “cost leadership business strategy” will have to be revised so as to make provisions for absorbing rising costs — such as a hike in membership fees. The latest earnings numbers reflect Walmart’s shift in strategy.