Target is going on the offensive against showrooming: the cheap-chic retailer will now match the prices of identical items offered by competitors — even online competitors — year round.
On Tuesday, Target announced it was extending a price-matching policy introduced for the holidays to the full calendar year. The policy promises that Target stores will match prices for identical items listed at several large online competitors, including walmart.com, toysrus.com and, of course, the world’s largest e-retailer, Amazon.com. The offer also extends to prices displayed at Target’s own website.
To get a price matched, customers must visit a Target store’s guest-services department with proof of purchase (a receipt) as well as a printed ad or Web link showing a cheaper price for the same item. Showing the price on your smart phone should do the trick. Target will match prices if a lower one pops up within seven days of the original purchase.
“Guests can confidently shop at Target every day for the best value in retail,” Gregg Steinhafel, Target chairman, president and CEO, announced in a press release. “We know that our guests often compare prices online. With our new price-match policy and the additional 5% savings guests receive when they use their REDcard, Target provides an unbeatable value.”
That’s right: in a way, Target is not only matching prices, but undercutting them for many customers, since shoppers using a Target credit card get an extra 5% off all purchases made in Target stores.
The unprecedented move demonstrates Target is taking the lead in the brick-and-mortar war to counter the effects of showrooming, the practice by which consumers scope out merchandise in person before ultimately purchasing online for less money. According to one recent survey, nearly half of shoppers were engaging in showrooming during the 2012 holiday season. Best Buy was the first major retailer to announce it would match online prices during the holidays, and the electronics giant is continuing to match Web pricing through Jan. 31, but Target is the first store to make online price matching permanent.
Prior to the 2012 season’s online price matching by Target and Best Buy — a competition that soon welcomed PayPal and Citi credit cards — the typical price-matching policy was restricted to prices listed in weekly store circulars. In other words, only prices offered in actual stores — not online — would be matched. Such a policy left a glaring hole because stores wouldn’t match prices seen online, which we all know is where more and more consumers go to find good prices to begin with.
While Target’s policy change is considered by some as a bold, perhaps necessary tactic given the times we now live in, year-round online price matching could also prove to be a big money loser for the cheap-chic chain. Some analysts thought that Best Buy and Target were playing right into Amazon’s hands by introducing their holiday season price-matching guarantees because the policies encouraged even more shoppers to compare prices online and because Amazon, with its low overhead (no stores), can compete better on prices. All of which would drive profits down for retailers matching prices only found on the Internet.
Likewise, Joel Bines of the retail-consulting firm AlixPartners told the Associated Press that while “retailers have finally gotten the message” in terms of the need to address showrooming head-on, a year-round online price-matching policy could backfire:
Stores have to make it easier for shoppers to get the price match. And he noted the move could also turn out to be “profit draining” as more people are encouraged to shop the Web to get the lowest price.
Retailers might not have any choice but to accept some profit draining. Regardless of whether online price-matching policies are in effect, more and more people are getting in the habit of searching the Web for the lowest price. Stores like Target must ask themselves: Is it better to match prices and accept smaller profits? Or to watch helplessly as consumers keep snatching up items at cheaper prices from the likes of Amazon?