Amazon Offers Consumers a Way Out of Stores
Amazon.com wants you to comparison shop. And it really wants you to do so
when you’re walking the aisles of its brick and mortar competitors.
Yesterday, Amazon introduced a new price comparison app for the iPhone. The
app provides prices from Amazon and other online merchants when consumers scan
in a barcode, take a photo of an item, or speak or type in the name of a product.
Amazon customers then have the ability, if the price is right, to purchase
the item on-the-spot using one-click.
"This app makes it incredibly easy to quickly compare prices on millions
of items before making a purchase," said Sam Hall, director of Amazon
Mobile, in a press release. "We’ve worked hard to have low prices at Amazon,
and we like it when customers comparison shop so they know they’re getting
a good deal.
Dave Sikora, CEO at Digby, told Bloomberg News, "If you’re a pure-play
e-commerce company, you want people to go to these stores and pull out their
app and get a better price. The retailers are an off-balance-sheet showroom
for those guys."
"This isn’t the first time you’ve gotten a retailer trying to get in
front of another retailer’s customers," Blake Scholl, co-founder of Kima
Labs, told Bloomberg. "It just hasn’t happened in the store before."
However, according to a report in Online Media Daily, the Amazon app is more
limited than Red Laser, one of the hottest apps on the market, which allows
comparison to a broad range of online and physical merchants. The Amazon app
essentially does a price check of the product in the store the consumer is
shopping to Amazon’s own network of online merchants.
The new Amazon app for iPhone is available for free on the iPhone App Store.
Discussion Questions: With this price comparison strategy from Amazon and
other mobile app developers, what counter-measures can brick ‘n mortar and
multi-channel retailers take? Do you see anything healthy coming of more
concentration on price comparison in the multi-channel marketplace?
It’s ironic, really. I’ve been saying for years that brick and mortar stores would become Amazon showrooms if other retailers didn’t get their act together, and now it seems to be coming true.
BUT…this shouldn’t come as a surprise to retailers, and if they actually provided real customer service in the body of the store, consumers might not just walk out and buy from Amazon. I know personally, I do that when it’s impossible to find someone to wait on me in the store. I say “eh” and just go home and order from Amazon.
The time has come to re-invent the in-store experience. We’ve been talking about it for years, but most retailers continue to cut in-store payroll, expecting self-service will be proxy enough. It’s not. My partner Nikki Baird has done a lot of work around trying to flesh out the future of the store. It’s time we all rolled up our sleeves and started working on it.
This is intended as a wicked whack at Walmart if you ask me, coming a week or so after Walmart’s announcement that it will offer free shipping on thousands of items. Walmart’s free shipping move is a game-changer because it creates full price transparency online; no more shipping profit centers and shell games – everything apples to apples. Walmart wouldn’t have gone into free shipping if they couldn’t maintain price leadership at the same time. Amazon’s next salvo basically says “Bring it!” They will be using brick and mortar store’s scale to increase their own. Consumer as price-bot!
Whether it’s healthy or not, instant price comparison apps are here to stay. Bargain hunting consumers who don’t mind waiting for merchandise to be delivered, and in some instances paying shipping charges, should flock to Amazon’s new app. When combined with Amazon’s one-click ordering and strong customer service, this is a formidable addition for the holidays.
Red Laser could be even more insidious for brick and mortar retailers. If Red Laser’s prices are accurate, consumers might be able to find better bargains online and across the street.
Brick and mortar can fight back by offering better customer service, instant gratification and unique promotional bundles.
These new price apps are only the beginning. More are on the way. The experience of purchasing is changing. Only time will tell which retailers will win and which will lose.
I’m not a fan of obsessive price comparisons online because often it’s apples and oranges and different companies often have different ways of pricing goods and services. For online purchasing, the actual cost to the consumer is impacted by the cost of shipping and handling.
Brick and mortar is going to have to rethink pricing and promotional strategies or risk being cherry picked. The real question here is how aggressively does Amazon price and on what items? Within a small percentage price differential consumers may be willing to simply buy it in the store in order to have the item right away but if Amazon can pull off big promotional pricing bricks and mortar are going to lose.
iPhone penetration is still small and this will only nip at retailer’s heels for the immediate future but it’s a harbinger of things to come so bricks is going to need to decide how, when, and where it wants to compete.
These types of mobile comparison shopping apps present a major challenge to retailers by removing one of their key strategic advantages: an information asymmetry versus their shoppers.
Traditionally, an ill-prepared shopper standing in front of a TV in an electronics store has been trapped in an information isolation chamber, with their opportunities for comparison and evaluation tightly controlled by the retailer. How reliable is this TV? How good is the picture quality outside of the showroom? What is a fair price? Shoppers are stuck with no information or, at best, a comparison against the other models the retailer chose to display. With a mobile app like Amazon’s or RedLaser’s, shoppers can now tell that the TV has a 3-star review on Amazon, is $60 cheaper online, and tends to break in the first year or two.
So, without the information advantage, how can a bricks-and-mortar retailer compete? To be trite: “By really competing.” Offer great products at compelling prices, well merchandised, and wrapped in great customer service, all in convenient locations backed by a strong reputation for honest dealing. People still like to touch products before they buy, and they like to know that someone will stand behind the sale. You’ll never be able to beat the absolute lowest price online for all your products, all the time. Instead, take advantage of the fact that people *like* to buy in person, *like* to deal with helpful merchants, and, when all else aligns, are willing to pay more for instant gratification and great service.
I find Mr. Hall’s statement a little disingenuous. He just released an app that allows customers to price compare from their brick and mortar competitors who have invested in building a store, hired and trained a staff, provided inventory (so you can touch, try, etc, the items), and all the other costs that go along with operating at retail and he likes it when customers comparison shop based on price! Yes, it also provides comparison to other online merchants, but given that it’s a mobile app there is no question it is aimed at the brick and mortar world.
Unfortunately, the first counter measure that comes to mind would not be embraced by our cell phone addicted population–that is to deploy technology that does not allow cell phones to work in a limited area. First, customers would shun the chain and then unfortunately something would happen and the chain would somehow be found liable.
A less offensive, and legal way, might be for the brick and mortar location to match its own online price if, and when, asked to do so. ABT Electronics has done that for some time.
This is extremely healthy for the consumer, at least in the short term, since they can always have an immediate “plan B” for buying most in-store items (if they are not needed immediately). Longer term, this could result in even more brick-and-mortar chains dying off, which may not be in the best interest of consumers seeking choice and variety in their shopping experience.
If you are competing on price then simple transparency is a good thing. This should work well for Amazon on commodity products where they maintain a significant price advantage.
However, I don’t see this as a direct challenge to Walmart, Target, Kmart, etc. Consider:
– The vast majority of customers in the low price stores don’t carry smartphones and data plans (yet)
– How much of a price difference does it take to get an in-store customer who has already driven there, parked, and walked through the store to walk away from a good that they can reach out and take home today? For customers, in the socio-economic segment that carry iPhones, I wager pennies won’t change behaviors.
– This strategy could backfire for Amazon. If after a number of scans it is all about pennies (plus or minus), then it will reinforce the store’s price competitiveness and result in customers deciding not to bother with the scanning anymore in-store, and feeling free to buy as much as they want in-store (ahhh sounds like EDLP).
I’d like to hear the BrainTrust’s comments on a radical proposal: actively embrace comparison shopping and use it as a selling point.
A retailer that truly believes it provides a compelling offering to their shoppers should preempt the comparison-shopping consumer by posting their own price, the lowest-available price on the internet (including shipping), and any online rating for the product.
It’s a powerful statement of confidence to say “you can save $12.01 by buying online, but we know you’d rather buy from us.”
Quite honestly, I have found a lot of situations where brick and mortar prices were less than Amazon’s. I am not sure this will prove all the significant in the long run. As far as counter measures, the obvious one is for brick and mortar stores to also offer online prices. If the consumer does not need to touch and feel the product and is willing to wait for delivery and deal with returns, they can sign onto the retailer’s website and have it delivered for a lower price. Of course, there is still the sales tax issue.
Actually there is a perverse side to this whole thing that might benefit brick and mortar. If the customer sees something they like but want to do more research before they purchase, they can go directly to the Amazon ratings and product descriptions to make their final decision.
With Android phones now outselling iPhones, and BlackBerry still commanding a large market share, I wonder why anyone would decide to release an iPhone-only app this day and age. This news is unlikely to get Android and BlackBerry customers to support Amazon properties.
The idea of being able to comparison shop while in a brick & mortar location is good; but should not be a surprise since we have been speaking about it for many months now. I don’t like the fact that the brick & mortar and all the expenses involved might be the victim if lower price is the only consideration. The brick & mortar will have to further train their staff on how to respond to being shown a lower competitive price on an iPhone.
The best hope is the prices will be so similar the customer will not want to travel to another location or pay shipping when they can take it with them instantly. Amazon has a competitive advantage that the stores need and will work at to overcome.
The argument that higher prices have to be charged by brick and mortar stores might hold up if the same retailers were offering like items for less everyday through their apparently lower overhead online operations. That, however, is not the case (at least not to any great degree).
There is something a little strange about all this great new mobile technology being developed and one of the primary uses for it seems to be for shoppers to do price comparisons. Retailers and e-tailers never seem to be able to get away from price being the biggest differentiator. If I were a brick and mortar retailer, I’d focus on improving customer service and experience, and increasing my store brand market share.
This is certainly inevitable for retailers. The question now is how do they and their vendor partners proceed? The actual use of this proves the point that many consumers cannot complete a purchase without physical co-location with the product, but there is no long-term support for free showrooms that I have detected. SO, the next step will be changes in distribution patterns in order to survive. We have already started to see this in moves like Sony took with Amazon in which it limited their selection to the same as Walmart, or in another case limited Google TV to Sony Style and Best Buy.
For new entrants, new technology or complex items this likely presages MAP pricing, limited distribution and windowing and the rest. This is NOT completely good for online resellers as it can lead to understanding that NOT EVERYTHING is available and on sale. Low pricing is not always the answer. Many products need explanation, connection and support. These things do not come from the ether. Moves like this are only the beginning and there are more to come.
I wish I could experience this app, but I have a droid. Can you actually order the product from Amazon while standing in a Walmart? Now that would be something….
I’d like to see the day when Amazon can cut a nice juicy steak, or make a beautiful pumpkin roll, and outsell me, or any other good operator who knows the value of a brick & mortar store.
I’m also glad I don’t sell TVs or other high ticket items, that Amazon can prey on. There will always be a value to a consumer who wants to see and feel the experience of a well-run business. We retailers have our work cut out for us, and enhancing the shopping experience is still a huge advantage for us, if we do our jobs well. Happy Holiday’s to all!!!
Plenty cool app, although certainly it is a step not a leap as Milo.com, Nextag and lots of other apps have been around for a while for price comparison purposes, just not so mobile.
I suspect Amazon will follow up with a Droid version within weeks, and I am sure they want to get it out before the holiday if at all possible.
I look at this as a component of a larger array of product information apps fired off by a 2d picture of a GTIN or QR code.
The information will be a challenge, but the consumer is liable to trust the price or other information displayed for a while, until whatever system they are using proves unreliable. Further, in some categories such as consumer electronics, the industry does a lot of codes that are particular to a certain retailer so that cross retailer comparisons is purposely difficult to deal with.
With regard to consumer appeal, price and convenience of shopping are the two primary drivers for FMCG. The balance of these two factors will become pretty obvious to consumers as they stand in front of the product they desire in the new “universal showroom.”
Maybe I’m nuts. I’ve been called worse. However, the idea that a consumer will make trips to brick and mortar stores (several), check prices, then reverse their intent to purchase and order online seems a little, well, unrealistic.
I’ve always believed the premise to be in the reverse. That is, browse the net, then go shop, then buy. The idea that a large majority of consumers will delay their purchase once investing time to visit stores for some amount of limited savings just doesn’t seem plausible.
Amazon to me has always had a bit of a higher price perception to me, but they overcame that eventually by their ability to deliver. They are competitive, but not a leader in price. They are a source for me when instant gratification isn’t required and they have provided me a source for items not found elsewhere.
I could just be not technology connected, however, this seems totally against human nature. If I’m in a store, can lay hands on the item I want and can have it now, I’m going to then wait several days to get it on my front porch to save a buck or two? I don’t think so! Especially if it’s a radio controlled flying toy helicopter (hint, hint, Mrs. Scanner), I want it now! Thank you very much.
This has been going on in Japan for years and the end result is, retailers have had to become sharper and think the same way customers do–one store. It’s a connected universe, we’ve known that for a while now so, what have we been waiting for anyway? Prices, quality, country of origin, benefits, fit any time, anywhere.
Speaks volumes though for creating proprietary product, doesn’t it?
This is the future-right now. Offering consumers a way to comparison shop in the store or online is a tremendous benefit. iPhone penetration may be small now, but it will grow along with competing technologies.
Consumers are growing used to comparing prices and reading customer reviews online before making purchases. Retailers need to understand this and develop marketing strategies that consider these facts.
I recently went to Best Buy to learn about the new Google TV and then learned I could purchase it directly from Sony for $100 less.
And Walmart’s free shipping still requires a consumer to go to the store to pick it up but that isn’t the same thing to me.