As recently as last fall, 88% of retailer CFOs said they did not view “showrooming”—scoping out merchandise in person before buying it at a cheaper price online—as a threat to their businesses, according to a BDO survey. And yet increasingly, retailers are proudly rolling out price-matching and low-price guarantees, with promises to match the prices on identical items offered by brick-and-mortar and online competitors alike—moves that would seem to only be undertaken if a store viewed showrooming as a very serious threat to sales.
Last year, during the ultra-competitive winter holiday shopping period, Best Buy and Target decided to match prices with online competitors. Many retail analysts bashed the strategy, predicting that the stores would lose their shirts if they competed head-to-head with Amazon on price, while also worrying that the act of checking and matching prices with the web would be a frustrating, time-consuming hassle in stores for employees and shoppers alike.
But the two retailers must have liked what they saw during what was first promoted as a seasonal, limited-time policy—or they at least felt like they had no choice but to keep it going in order to compete in today’s marketplace—because soon after the holiday times had passed, they made price-matching permanent. Target announced its change in January, and Best Buy followed along by saying the “end of showrooming” would take place in March with its promise to indefinitely match prices on identical products with 19 major online retailers.
By most accounts, Best Buy’s price-matching guarantee, and its renewed focus on competitive pricing in general, has helped lead to a phenomenal comeback for the electronics retailer, with improving quarterly results and the company stock price on a tear over the past year. During a conference call with investors this, Best Buy CEO Hubert explained that the company sought “to eliminate price as an obstacle to buying,” though no one should expect to see Best Buy regularly undercutting the competition:
“We love the traffic on our site, in our stores, and we don’t want to lose a customer because of price. But we don’t feel that we need to be lower than (the) competition,” he said. “We just don’t want to be beat.”
On Thursday, Toys R Us joined the ranks of retailers that are extending price-matching to include prices shoppers can readily found on the web. “We will match prices from selected online competitor websites, including Walmart.com, Target.com, BestBuy.com, Sears.com, Kmart.com, buybuyBaby.com, Meijer.com, FredMeyer.com, diapers.com, BabyDepot.com, and Amazon.com,” the new Toys R Us Price Match Guarantee states.
The policy sounds terrific for shoppers, but there are plenty of asterisks, exceptions, and requirements that help Toys R Us (and other price matchers) to avoid lowering prices. Most obviously, some consumers hear the words “price matching guarantee” and think that a store automatically guarantees that its prices are as low as the competition. But stores don’t preemptively drop prices; it’s up to the customer to shop around and prove to a store clerk that a competitor has a cheaper price for an identical item. Only then will a price be matched. Very few shoppers bother with this process—maybe 5% or 10%, according to one retail analyst—so the vast majority of consumers don’t see any benefit from price matching.
That’s probably fair though, as consumers who do the work of shopping around reap the rewards. What holds many customers back from seeing any benefits thanks to price matching is that the homework required is not necessarily easy or straightforward. Among the circumstances in which Toys R Us will not match prices are things like “Buy One Get One with purchase offers,” “Online prices advertised during the week, and “Online pricing that is limited to one day or less (e.g. one day deal, 6-hour sale, evening sale).” Also, the Toys R Us fine print mentions, “Competitor shipping charges will be calculated and factored in the cost of online prices,” so if an online competitor’s price is cheaper by $6 yet the basic shipping charge is $6, it’s a wash.
Best Buy and Target have their own lengthy lists of price-matching restrictions, such as Best Buy’s rule that the price in question must come from a major online retailer like Amazon or Newegg.com or “a local retail competitor’s store,” which translates as one located within 25 miles of the Best Buy where you’re shopping. Any further than that and you’re out of luck with price-matching requests.
In all cases, what the retailers are going for with price-matching or low-price guarantees are policies that sound wonderful enough to draw in shoppers, yet which minimize the opportunity and likelihood for shoppers to actually pay less than the price listed in stores. C. Britt Beemer, chairman of the retail consulting firm America’s Research Group, explained to the Record of northern New Jersey how price-matching can often work better for the retailer than the shopper:
By offering to match online prices, “it tells the customer that the retailer feels pretty good about their pricing,” Beemer said, because most people assume that online prices are the lowest. Matching online prices for in-store purchases could help draw customers to Toys “R” Us stores, Beemer said. “Toys ‘R’ Us’ problem is how do you get more shoppers in the front door,” he said.