Meet the Enemy: Price Comparison Apps

Discussion
Dec 17, 2010

By Tom Ryan

According to an article in Wednesday’s Wall Street Journal, the use
of smartphones inside retail stores to comparison shop prices in cyberspace
is growing and “threatening to upend the business models of the biggest
store chains in America.”

The more than 2,000-word expose concluded that in-store mobile shopping will
only steadily increase as more Americans purchase smartphones and as shopping
apps become increasingly sophisticated. The article points to recent stats
from IDC Retail Insights showing that about 45 percent of customers with smartphones
had used them to check on a store’s prices. Also, Coremetrics found that consumers
using mobile devices accounted for 5.6 percent of visits to retail websites
used on this year’s Black Friday, up from just 0.1 percent in 2009.

But the article particularly focused on the many threats to retailers due
to greater consumer visibility into the value of both deal and regular-priced
goods.

Through a growing multitude of price comparison apps, consumers now have the
ability to see whether “specials are really so special,” the article
states. A cheaper price on any touted deal can quickly be spotted via a mobile
device at an online or offline competitor. Moreover, the item can be purchased
inside the store. Just as important, mobile phones provide easy access to pricing
comparisons on regularly-priced goods; the items with higher-margins many retailers
are betting consumers will scoop up while picking up the deals.

Particularly seen as vulnerable were retailers of branded, big-ticket items
like electronics and appliances already seeing much of the action on price-comparison
websites. Some analysts attributed part of Best Buy’s third-quarter shortfall
to the growing popularity of price-comparison apps. Retailers using every-day-low-pricing
strategies, personified by Wal-Mart, were also seen as facing new challenges.

“The whole notion of going to one place to buy everything in one fell
swoop because you are sure of a total market-basket savings may go away,” Leon
Nicholas of consultancy Kantar Retail, told the Journal

Finally, observers said that despite the higher brick & mortar costs, it will become more challenging to charge higher prices at retail than on websites.

The article did note that there was no consensus yet on whether many shoppers
will take time to comparison shop with their mobile devices in the future.
It was also not known if the comparison shopping would be largely reserved
to high-ticket categories.

Discussion Questions: What obvious and less-obvious threats do price-comparison
apps present to retailers? Will most Americans eventually be comparison shopping
in-store online? What categories appear to be particularly vulnerable?

Please practice The RetailWire Golden Rule when submitting your comments.

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28 Comments on "Meet the Enemy: Price Comparison Apps"


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Gerald Sawyer
Guest
Gerald Sawyer
10 years 5 months ago

It does seem in today’s age of technology that this is going to become more of an issue. The next generation of consumers are already immersed in the ideas of technology making life easier, and as their parents pick it up and involve their children in this idea, it is only a matter of time before this becomes commonplace. So, I feel that retailers may need to make the appropriate adjustments before they go the way of the dodo.

Dick Seesel
Guest
10 years 5 months ago

Price comparison apps are yet another example of the customer taking control of the shopping experience, similar to a recent panel discussion about blogs and social networking. The technology certainly brings transparency to the pricing process that wasn’t there before; plus, the customer doesn’t have to drive across town for the lower price if there is a direct link to a website (with free shipping). The merchandising implications are profound, with increased movement toward exclusive brands and models to avoid just this sort of “wrong price” situation.

Peter Fader
Guest
10 years 5 months ago

This is a tempest in a teapot. What happened to all those price-search websites? Gone, goodbye. It’s true that these apps encourage consumers to put more weight on price than they should, but most consumers will resist the temptation (perhaps after dabbling with them once or twice).

Despite all these new technologies, the usual rules will continue to hold: attributes such as service, selection, quality, and convenience will drive consumers’ purchase decisions far more than price will.

Bob Phibbs
Guest
10 years 5 months ago

If retailers continue down the path of “mobile” they will be relinquishing their bricks and mortar advantage to become nothing more than a showroom.

While I doubt Red Laser and the rest are game-changers yet, the more we focus on a 3″ screen in someone’s hand as either a threat or opportunity, the less we’ll focus on the only ones (with sales training) who can truly move the conversion rate and average check–the employees.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
10 years 5 months ago

This train has left the station and is gaining momentum. Within 5 years, the smartphone will be the entry level device and 4G will be pervasive–bringing even more shopping capabilities into the store (i.e. video, A/R, gesture). Retailers need to be working today to adapt their customer value propositions/differentiators and business models for the reality of price transparency.

Paula Rosenblum
Guest
10 years 5 months ago
I guess my answer is, the impact will be as significant as retailers allow it to be. I’ve known for years that mobile phones represented a significant threat to retailers that aren’t sharp in their prices–it was always just a matter of time. I can still remember the first time I told a CIO who didn’t think the smart phone would impact his high-end apparel business, “So you’ll be happy when your store becomes a showroom for Amazon?” He got really quiet after that because Amazon was hosting one of his main apparel competitors at the time. But the more important question is, “What are retailers going to do in their stores to add value and make it worth consumers’ while to actually stay there and pay a slight up-charge?” Retailing has never been solely about price, and confidence in the retailer’s assortment and understanding of the customer’s needs (ESPECIALLY with big ticket items) is definitely worth something. Can retailers engage their customers through programs like ShopKick to make the in-store experience more fun, more… Read more »
David Livingston
Guest
10 years 5 months ago
I think most American will embrace comparing prices on their phones. Retailers will respond the way they always have and that is to adjust their pricing. The days of ad matching will be over and all a customer will have to do to negotiate will be to show the store they can get the item at a lower price–so match it or beat it. I was doing a price check of top volume items in supermarkets in Buffalo, NY in the mid 1980s at Tops, Wegmans, Bells, and Super Duper. Every item in every store was the same price. How did they do that? They did was I was doing (price checking) and made adjustments. That’s all retailers will need to do. If the customer can compare prices, so can the retailer. Retailers will do what they have always been doing. This might actually make grocery shopping fun. The downside is that is will be more transparent. Low income area stores will have their higher prices exposed and they will come across as being politically… Read more »
David Dorf
Guest
10 years 5 months ago

I don’t think grocery and fashion retailers have much to worry about, but those that sell brand-name hardgoods need to stop relying on price as the primary way to compete. Providing strong customer service, in-store demos, hassle-free returns, and post-sale services are becoming more important. I wrote more on this yesterday.

Charles P. Walsh
Guest
Charles P. Walsh
10 years 5 months ago

Technology is definitely changing the way shoppers behave facilitated by more powerful and more convenient technology. I don’t agree with some who believe that service and selection can offset these trends and that these considerations are greater than price.

Price Comparison apps negate the attributes of selection and quality since these are held equal in comparing same items using price as the qualifying factor. Once the best price has been established then the last factor mentioned, service, may come into play for the buyer.

It is a game changer and smartphones are leading the way and impacting both retail operations as well as consumer products. What products and services that we know of today have or will be affected by future smart phone functionality and apps? The price sharing websites mentioned by Peter, Garmin and Tom Tom, that would be an interesting discussion topic.

Doug Fleener
Guest
10 years 5 months ago

I think it’s a game changer…because if a lot of these retailers don’t change they’re going to be out of the game.

Retailers who don’t add value and commoditize their own products are going to get hurt by these apps.

Most consumers are fine if a retailer doesn’t have the absolute rock-bottom price, but the experience must make up for the price difference. Unfortunately in most store the price gap is too wide and the experience far short.

I would also point out that this same technology can be used by the staff to engage the customer and help complete the sale.

Max Goldberg
Guest
10 years 5 months ago

Comparison shopping has been around as long as multiple merchants carried the same products. It’s not going away and retailers have to adapt to it. The BrainTrust panel has commented before on consumers using smart phones to comparison shop. The conclusion was that brick and mortar stores have the advantage of having the product in stock and immediately available. They also have the advantage of live, knowledgeable salespeople. That being said, if brick and mortar retailers do not do a better job of customer service, consumers will defect to online merchants that don’t have brick and mortar overhead. At that point, shopping becomes a pricing game.

Bill Hanifin
Guest
10 years 5 months ago
The last data I saw published stated that smartphones had reached 9% penetration of the population. Of that 9%, only a percentage will take time to use their phone while shopping to ensure that the deal they are considering is the “best one.” Of the group engaging that behavior, they will only do so when considering a purchase of higher value and/or a branded item that can commonly be found at competing stores and online. This does not mean that retailers can relax as consumers are only part way on their journey to empowerment. At the same time, I would not extend the reporting in this article to say that all retailers should panic and try to match the best price in the market. That is a recipe for disaster for any retailer except the one or two in a category which can pull it off. Bottom line: there are more tools today than ever that will keep some money in consumer pockets as they shop. It does not mean that retailers can forget about… Read more »
Mel Kleiman
Guest
10 years 5 months ago

AS I read all of the posts, I think about the changes that have happened in the airline industry. It has become an industry with basically two types of buyers. One, the price shopper and two, the business traveler (now in many cases looking at price).

Just as the amount of service has deteriorated and the number of competitors has been reduced it looks like the same thing is going to happen to the retail sector.

Unless retailers can come up with real reason for the consumer to spend more at their location the consumers is going to fly coach get squeezed into small seats and pay to check suitcase.

Americans are being trained to think it is all about price.

Frank Beurskens
Guest
10 years 5 months ago
Was in a Best Buy yesterday when a shopper noticed we were looking for a keyboard and mentioned he just checked online and noticed they were marked down from $129 to $69. He purchased one, and we took the other. Checkout had to call in the store manager to confirm the lower price since it did not show up in POS. We got the price, but I received a 15 minute lecture from the store manager about how the .com division is killing the in-store with these type of deals, and then shoppers come in demanding the lower price. His POV was about the number of students and disadvantaged people he hires and the cost of operating a big-box brick and mortar store, and if shoppers keep this practice up of comparison shopping and mining their online sales, it will force him to eventually close his store. Obviously a difficult line of reasoning from a customer’s perspective, but you could feel his frustration. In-store cell signal scramblers and Wi-Fi access only with limited domain access… Read more »
W. Frank Dell II, CMC
Guest
10 years 5 months ago

Price comparison programs have been on the internet for years. The issue is are they independent or advertising? Many retailer web sites make it hard if not impossible to find prices and when you do find them are they accurate? Keeping prices up to date is an issue for most retailers. Even with prices being electronically communicated to the store from headquarters, they don’t always reach the shelf.

What has to happen is that web site prices need to be connected to the same system for automatic update. Some retailers allow manager’s specials and only the store manager knows what the price is. The problem with mobile price comparison is the same. How recent is the price? Is it independently collected or is this just advertising? All this points to one thing, don’t price in the closet.

Tina Lahti
Guest
Tina Lahti
10 years 5 months ago

I know that I have comparison shopped Walmart.com on my Blackberry while looking at an item in a bricks and mortar Best Buy. I have also used my Blackberry to show a Walmart.com price to a cashier at Walmart for a price match. I have found that I am cheap enough to do this even for relatively inexpensive items. My Walmart price match was for $5 on a book. I think that retailers will have to catch up or be left behind.

Gordon Arnold
Guest
10 years 5 months ago

The present day shopper is searching online for everything whether they know it or not. Marketing departments are–sadly enough–the last to learn how to empower themselves with new technologies in I/O devices and software applications to succeed in delivering their messages. “Now what do we do?” approaches and defensive marketing is growing at an alarming rate. This is clearly demonstrated in today’s article.

A good example is how SCO bought UNIX V and got clobbered by LINUX so they blamed the market instead of their poor insight.

Creating quality inquiry surveys for High School and College students would go a long way in determining how to communicate with them effectively. An advanced approach would be to invite students to design the question content and survey participation method or means with strong marketing guidance. Trying something new will not guarantee success but making the same mistakes does mean certain failure.

Bill Bittner
Guest
Bill Bittner
10 years 5 months ago
The smart retailers have always realized they have two customers: the consumers and the manufacturers who are using the retailer to reach them. There is a big difference in operating costs between the direct-to-consumer and the brick-and-mortar channels. There is also little that can be done to prevent spillover from one channel to another. As consumers become more comfortable with the electronics in their home and more willing to have stuff delivered, the benefit of the brick and mortar stores will continue to decline. As the wall street journal article indicated, big ticket branded merchandise will be the most vulnerable. Some big retailers are able to secure custom versions of manufactured products that make them the “exclusive outlet” for that model. By only offering certain models in specific channels, the manufacturer will be able to keep the retailer in the loop. If retailers work harder to merchandise and represent the manufacturer’s products, more manufacturers will appreciate their role. This should encourage manufacturers to establish minimum pricing rules that can preserve the “service pricing” necessary for… Read more »
jack flanagan
Guest
10 years 5 months ago

While I agree completely agree that the usual rules (service, selection, quality, convenience) will still apply, an ever-increasing number (at an ever-increasing rate) will find they can get all that PLUS price.

The lead item in the article showed a dramatic price saving when the customer who was standing in Best Buy opted to but it from Amazon.com (no slouch itself in service, selection, quality, convenience).

Somebody’s brick & mortar margins are going to take a haircut.

Doug Stephens
Guest
Doug Stephens
10 years 5 months ago

To assume that mobile price comparison won’t become increasingly ubiquitous is to hide your head in the sand. These are probably the same people that said “the consumer will never feel comfortable giving their credit card number to a website.”

This is and will continue to gain momentum and as it does it will force retailers into one of 4 distinct positions.

1. Price match any lower price the consumer can find on identical items
2. Migrate offerings to store branded or exclusive lines
3. Offer unique incentives or rewards to consumers for purchasing in-store
4. Create a retail brand and in-store experience so remarkably compelling that price becomes far less relevant.

The only other alternative will be to close up shop.

Gene Detroyer
Guest
10 years 5 months ago
Smart phones are not the game changer, technology is. In the long run, the brick and mortar business model as we know it will go away. If a retailer is not looking at the power of the Internet as the primary retailing vehicle of the future, that retailer will be left behind. Two stories worth repeating related to my Millennium Generations students…. In a discussion last year of “Are stores obsolete?” one student said “no.” He likes to go to the stores to see what he wants to buy. He gave an example of a recent shopping trip for a new Netbook. Then another student asked, “Where did you buy it?” The answer, with a smile, “I went home and found the best price on the Internet and bought it online.” In a recent discussion about supermarkets in NYC, of a class of about 25 students, only 3 were familiar with brick & mortar stores (Trader Joe’s, Whole Foods, and a local). Almost the entire class was familiar with Fresh Direct. And now, a nod… Read more »
Herb Sorensen, Ph.D.
Guest
10 years 5 months ago

Pricing is a vastly overblown tool anyway. At least in terms of everyday items. I have yet to see a survey of shoppers on what things cost in their local market that came anywhere near accuracy of what things are actually selling for. Of course, many of those very same shoppers are super confident that they themselves know prices very well. It’s the difference between the habitual mind and the executive mind. The habitual mind controls what we do, and the executive mind controls how we talk about it. What a vast gulf!

Kai Clarke
Guest
10 years 5 months ago

This is a poor example of how pricing has impacted consumer electronics, and retailers in general. Anyone who has purchased a cellphone, computer or almost any consumer electronics device is aware of the presence of the Internet, and how price comparison shopping is available on their cellphone, knows that they can purchase electronically, shop electronically and the impact it has on their purchasing decision. However, anyone who believes that this is just now becoming an issue hasn’t looked at Dell Computer, Amazon, or Apple in the last few years….

Christopher P. Ramey
Guest
10 years 5 months ago

Retailers have always been hyper-cognizant of pricing. Younger consumers’ use of technology will accelerate the impact. There are strategies and tactics to mitigate the damage caused by price comparison apps. There are also creative ways for brick and mortar stores to leverage new technology for their benefit.

Ultimately, the biggest impact will be on small business rather than category killers.

Cathy Hotka
Guest
10 years 5 months ago

I will take a different tack. I think that retailers will have to address the obvious problems customers find in stores–uneven product selection, out of stocks, pants you have to take off the hanger to tell which size they are, etc. Time starved customers are searching online not just for prices, but also for availability. Customers should not have to use a cellphone to find the merchandise they want.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 5 months ago
I haven’t yet witnessed anyone using a smartphone for in-store comparison shopping. In-store mindless blabbing, yes. But who am I to question the WSJ, and how could I miss something that is so “threatening” to the “biggest store chains?” It makes one wonder why the “biggest store chains” haven’t installed cellphone scramblers in their stores if this is such an imminently threatening development. I regularly use cyberspace for comparison shopping, but it’s via a computer before I leave home so I can plan my shopping trip better. Why wait until you’re already in a store and then rely on that itty-bitty cellphone screen while incurring internet access costs at the same time? I do see this as useful for impulse shopping, when consumers encounter something to buy that they hadn’t considered before leaving home. They can check competitive prices on the same item, but if they find it for a few cents cheaper in a miles-away store (and not even knowing if it’s in stock), how is that helpful? The resulting benefit to stores, of… Read more »
malcolm wicks
Guest
malcolm wicks
10 years 4 months ago

The big factor that has only been lightly touched here is brand. We all buy brands based upon what we feel they represent. This includes: customer experience, quality, support, trust and many other factors, just one of which is price. People will always be happy to pay more for brands they trust. This could be a brand of product or a brand of retailer. For example the most successful Supermarket in UK in terms of YoY growth is Waitrose where the standard average basket cost could be up to 20% more than competitors.

I would certainly suggest that retailers need to work on their brand identity and when it’s good, increase the selection of own-brand goods that can’t be bought elsewhere. Price is the crudest weapon to get customers to buy and those who only keep cutting prices as a response to competition perhaps deserve to die. Retailers who understand their brand and what their customers really care about will be the winners.