By Matching Online Prices, Are Best Buy and Target Doing Exactly What Amazon Wants?

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A Best Buy store on Aug. 21, 2012 in New York.

When Target and Best Buy recently announced that they would be taking the fight to Amazon during the holiday shopping season by matching prices with major online sellers, many shoppers reacted with the thought: Well it’s about darn time. Retail analysts, on the other hand, say that online price-matching is not only risky and potentially confusing for shoppers and store employees — but that it could also wind up helping Amazon more than it does any brick-and-mortar outlets.

Susan Lee, who runs the consumer goods and retail practice in North America for Simon-Kucher & Partners, envisions a way (several ways, actually) for brick-and-mortar price matching to be used by Amazon for its own advantage. “Can you imagine if Amazon runs deep, limited promotions on consumer electronics solely during Best Buy’s store hours?” Lee asked via press release. “To the extent that consumers even go to Best Buy at all, Best Buy either loses its shirt on every sale, or loses the ring entirely.”

Matching online prices, which can change by the minute, may also prove to be complicated and time-consuming — and ultimately frustrating for retailer and shopper alike. Per the Wall Street Journal:

“Can you imagine being on the checkout line at Target with 20 items and you’re scanning products on your phone to find out the gum is 12 cents less at Amazon?” asked Sheri Petras, chief executive of CFI Group, a consulting company that measures customer satisfaction. “Can you imagine standing behind that person in line?”

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Showrooming isn’t restricted to the holiday shopping period, but thus far, Target is only planning to match online prices for a limited time, from November 1 to December 16. Best Buy’s policy stipulates that its stores won’t match prices Thanksgiving week, starting on the Sunday before Thanksgiving and lasting all the way until the end of Cyber Monday, and that store employees can decide not to match prices whenever they feel like it.

It’s not hard to see how these policies too could prove aggravating to shoppers. By failing to match customer expectations regarding price-matching, Target and Best Buy could ultimately wind up pushing shoppers more in the direction of Amazon, Mary Blue, a principal at The Cambridge Group consulting firm, told the Chicago Tribune. “If you cut it off at a key period, you’re telling the shopper that you don’t care about them as much,” Blue said.

By most accounts, it’s commonplace for shoppers to browse stores while simultaneously consulting hand-held devices. In one recent survey, 43% of smartphone or tablet owners say they have showroomed. Nearly all (97%) of those who engage in showrooming say they sometimes or frequently buy items later online for a cheaper price.

(MORE: For 2012 Holidays, War Is On Against Amazon: Target Matches Online Rival Prices)

But by promising to match online prices, Target and Best Buy are giving shoppers even more reason to give showrooming a try. For the customer who might have otherwise picked up a gadget and proceeded immediately to the checkout area to pay, the new price-matching policies will serve as a reminder to hop online and see if there’s a cheaper option. This is not a competition that brick-and-mortar retailers will often win, according to data cited by the WSJ:

A recent survey by brokerage house William Blair & Co. found that on average Target’s prices were about 14% higher than Amazon’s, Best Buy’s were 16% higher and Wal-Mart’s prices were 9% higher. The comparison included shipping costs for Amazon, but not sales taxes.

Speaking of Walmart, for now at least, its ad-match guarantee—which is in effect year-round, not just for the holidays—still does not include Internet pricing. Avoiding a head-to-head, open-ended pricing competition with Amazon may be a wise move. While some analysts say that price-matching with online sellers is a risk that Best Buy has to take due to its precarious spot in the marketplace, others think the move is likely to spell doom for the big-box electronics retailer.

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“Time, resources, and flexibility all work in Amazon’s favor if Best Buy starts a retail price war in consumer electronics,” said Simon-Kucher’s Lee. “This is a strategic mistake for Best Buy, from which it might never recover.”

Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

3 comments
lunaticial
lunaticial

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cbizzanelli
cbizzanelli

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dNak08
dNak08

Online price matching. RT @TIME: Are Best Buy and Target falling into Amazon's trap? | http://t.co/kkGlPv3f (via @TIMEBusiness)