Do retailers need to align their prices online and in stores?

When he shopped for my daughter’s 10-year-old Halloween costume last October, I took out my smartphone and jumped online to see if the store had the same colorful pencil costume on display. , I was surprised to see that the outfit I held in my hand was 10 dollars cheaper online at the same store.

I asked the cashier if she would pay the online shop price. She politely refused and said the store did not meet the discounts on their website. However, she offered me to order the costume on the shop’s computer and to benefit from the free shipping. Sold!

For multichannel retailers selling in both physical and online shops, pricing is a particularly difficult issue. And when it comes to automatic pricing policies, retailers have different strategies. Some categories, including Best Buy, Target, Staples and Sears, like to put their prices together online if a customer so wishes. Others, like Home Depot, Bloomingdale’s, and Macy’s, are generally strong enough to say no.

It may seem that shops that agree with online prices may want to lose money by offering discounts to surveyed customers. However, some do so to appease an angry customer or for reasons of fairness. However, in some cases, self-coupling is the best strategy for achieving higher profits, says Professor Elie Ofek, professor at Harvard Business School, T. J. Dermot Dunphy, Professor of Business Administration.

“We have found that price adjustment is not just a necessary evil, it can be a competitive tool and increase the bottom line of a business,” said Ofek.

Ofek’s search matches your price? Matching as a retailer’s multi-channel pricing strategy was featured in the April 2018 Marketing Issue. He wrote the article with Vineet Kumar, an assistant professor at Yale, and Pavel Kireyev, a former graduate student at HBS.

Is twinning an effective strategy?
The price correlation between competing retailers has been the subject of much research, but Ofek believes that this study is the first to investigate whether the principle of self-sufficiency as a pricing strategy is viable.

“IF YOU PARTICULARLY TALK WITH THE MILLENNIUM, YOU FIND THAT YOU AGREE THAT THE RATES ARE NOT THE SAME UNDER THE CHANNELS.”
The researchers surveyed nearly 500 consumers on their spending habits and surveyed more than two dozen retailers to see which ones looked the same. They developed a model that analyzed different types of retail situations and considered various consumption-related factors, including their preference for particular brands, their preference for in-store and online sales, and how they chose to buy a product. Product.

“Pricing is an important decision,” notes Ofek. If the retailer decides to offer the same price to all consumers, this may lead to a decline in the retail price and a reduction in profits. “However, if you talk about millennia in particular, you find that they agree that channel-to-channel pricing does not have to be the same, giving the retailer more freedom in pricing.”

Of the retailers surveyed, between 55% and 60% of the prices are the same and the others have no formal policy statement or expressly declare that they do not fit.

When do retailers have to sort themselves?
The research team found that self-adaptation can work for the company in three ways:

Retailers can raise prices online. While online prices tend to be cheaper, an independent retailer can increase the online price of a product to offset the loss that the company might suffer from a longer price break for consumers. call up the price adjustment in the store. If the retailer has a non-compliant competitor, the competitor often also raises its online price, and both retailers benefit from higher prices. In this case, a so-called online attenuation effect is created by self-balancing.

“Above all, if your competition comes exclusively from e-commerce like Amazon, offering proper prices as a stationary retailer, you can avoid reckless online pricing,” says Ofek. “And you also allow Amazon to keep prices higher, it’s a win-win situation.”

Retailers can charge undecided consumers higher prices in the store. A self-balancing strategy allows a retailer to charge different prices to two types of buyers: those who searched online and arrived at the store and were willing to buy online price checks for undecided consumers who started buying. Process with a visit to the store.

“Online consumers” (savvy consumers looking for food online first) get the lowest online price by asking the store to self-direction, while undecided consumers who only discover the product are encouraged to appreciate the higher price during their visit pay at the store. This weakening effect of competition competition helps the retailer to offset the loss of income of the consumer by placing more strain on the undecided consumer.

Retailers can also use the self-concordance of consumers who have a smartphone. The researchers found that about 55% of consumers use their mobile devices in the store. Even if some indecisive consumers in a store look for products and prices for their smartphone, companies do not necessarily lose the profits they deserve.

As? While consumers may find a lower price for a similar item from another retailer through a mobile search, a visit to another store costs time and travel that many do not want. ,to disturb. Since these consumers have price proof online, the retailer can automatically increase this price to avoid excessive pricing. These trapped consumers willingly pay the price to avoid the store running out. Besides, rivals will probably do the same thing.
Cheap retailers are often not worried
Some types of retailers are particularly prone to self-sufficiency, especially the sale of consumer electronics and home improvement products. Lower department stores and clothing stores avoid this practice more often.

“We hope that this research will help companies to formulate the essence of their pricing strategies and messages”
“It happens that no one in a particular market wants to propose a system of price equality – if the value of the product is low and there are not too many independent consumers, buying an equivalent price will not give you much extra profit from the store sold Segment, “says Ofek. “By differentiating prices from one channel to another, you make a bit of money by keeping the consumers who visit the store at the highest possible price, and people have to pay to get what they want in the store ”

Ofek, whose research focuses on new product strategies in technology-driven business environments and consumer-oriented companies, hopes that the research will help retailers solve the complex puzzle prices and determine the best fit for their activities.

Before deciding whether companies should adapt, companies should first determine if their competitors are already doing so.

“If you feel in an industry where a significant number of people enter the store and your rival already agrees with the prices, you may not want to do the same, as this can lead to poor results,” explains Ofek. , “But if your rival does not have the same price, you might want to do so because you could benefit from this strategy and we hope this research will help companies to formulate the essence of their pricing strategies and messages.”

And it serves to help consumers like my daughter and me. Well, when we go shopping, we first have to look online and ask the store if they will earn a similar price.

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