BrainTrust Query: Price Transparency – Five Strategies to Address the Paradigm Shift in Retail

Discussion
Oct 29, 2012

Through a special arrangement, presented here for discussion is a summary of an article from the Lenati blog.

Rather than ignore it or try to fight it, retailers need to adjust right along with their customers to the new age of price transparency. They need to add customer-perceived value to their products and services that justify a higher price than an online-only retailer.

To add-value successfully, we recommend five strategies:

1. Offer Exclusive Product – House brands offer built-in protection against showrooming as there exists no direct SKU-level equivalent at another retailer. Retailers from Sephora to Macy’s to Supervalu have increased their PL penetration in recent years due to higher margins and anticipated competition in national labels. For small retailers, it becomes even more critical to offer hard-to-find, limited stock items. Uniqueness is a factor for which customers will pay.

2. Take Advantage of Multi-channel – Some retailers are using their online channel to build the value prop of shopping in-store. Nordstrom associates are now equipped with mobile POS devices that give them access to the company’s entire inventory, including Nordstrom.com. And by offering free shipping on all orders, regardless if ordered online or in the store, Nordstrom is truly becoming channel agnostic. By actively using the online channel to overcome hurdles that often drive consumers to sites like Amazon, retailers are keeping their sales dollars in-house and providing great service by letting their customer decide how they want to shop.

3. Get Local – A physical location within a community makes it easier to create an authentic connection with a customer. With this understanding, national chains such as Macy’s, Walgreens, and Trader Joe’s have localization strategies in the effort to make each store unique and become part of the community. But, in order to win over the temptation of online pricing, retailers need to go beyond offering localized product — they need to actively reach out to their consumers and create a community that is specific to the area.

4. Provide a Loyalty Program – A well-executed, easy to understand loyalty program can help brick-and-mortar retail stores retain customers and keep eyes from wandering. Safeway, Chico’s, Target and REI are among the many retailers whose loyalty programs offer compelling value. Although each of these loyalty programs are different, what is consistent is that they are easy for the customer and provide enough reward that the customer feels there is more value in spending in one place than shopping around for deals.

5. Bring Online Information In-Store – By using smartphones or touch screen technology, brick-and-mortar retailers could actively bring the abundance of online information in-store, and eliminate the need to research online before checking out the physical product. Letting customers physically explore the product and get all the information they want in-store essentially kills two birds with one stone, and this convenience may give brick-and-mortar retailers added value justifying a higher price.

Which of the suggestions mentioned in the article do you think will most offset price competition from online retailers? Do you think retailers need to execute most or all of these strategies or should they pick one or two to on which to focus?

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35 Comments on "BrainTrust Query: Price Transparency – Five Strategies to Address the Paradigm Shift in Retail"


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J. Peter Deeb
Guest
9 years 10 months ago

The multi-channel approach seems the most impactful to me as retailers move to satisfy the changing consumer. It should not matter what channel sells the product, only that the retailer keeps the sale! All of the suggestions above are important and the brick & mortar retailer who integrates these into the operation should be successful. The degree to which they implement each will depend on the type of retailer and the importance of local products, community involvement and the price differential with their competitors.

Phil Rubin
Guest
Phil Rubin
9 years 10 months ago

There is no question that in our experience that a well defined and brand-specific loyalty strategy will overcome pricing challenges. It’s a question of value and value is more than (relative) pricing, at least for companies that have some kind of unique selling proposition.

Further, loyalty marketing — at least how we define it based on best practices — encompasses all of the other attributes mentioned. Loyalty delivers exclusivity, across channels including local, and it is a superior way to deliver content.

Dick Seesel
Guest
9 years 10 months ago

These are all good ideaas but (as the question suggests) each retailer needs to focus on the tactics that are best suited for its own brand positioning and merchandise content. For example, more private-brand or exclusive merchandise may not work as well in a sporting goods store where the customer is looking for recognizable labels and styles.

The common theme of most of these ideas is the importance of customer service…whether it’s having a sales associate available to “close the deal,” or having improved access to e-commerce inventory. The value added through customer service has not been lost on Apple (the champions of pricing leverage), and it’s good to see other retailers putting a renewed emphasis on it.

Bob Phibbs
Guest
9 years 10 months ago

Interesting how none of the suggestions involve people. I would suggest to combat the paradigm shift, retailers need to see that their policies of limiting hours to part-timers has fundamentally altered their retail space with employees who have little loyalty, inclination or training determining the success of the brand. Fix the people first, the rest will follow. Otherwise there’s just no “there” there.

Ben Sprecher
Guest
Ben Sprecher
9 years 10 months ago
I see offering exclusive product as the most powerful of the strategies mentioned for blunting the impact of price transparency. After all, there’s no way to compare prices on Trader Joe’s Candy Cane Joe-Joe’s because there’s no such thing anywhere else. If you want them (and believe me, you *definitely* want them!), you have to go to Joe’s. One caveat — there’e a cynical way to offer “exclusive” product (which mattress stores have done for years), which is to get the manufacturer to provide you with a different model name or serial number on an otherwise identical product. I see this as a sign of weakness on the part of a retailer, since it’s essentially admitting that you have no real basis for competing other than by confusing and confounding your customer. Customers hate it because they see it for what it is, and I shy away from retailers who do it. As an example, I bought a TV at Costco that was available for a slightly better price online (and I checked that while… Read more »
Ryan Mathews
Guest
9 years 10 months ago

I guess the two that stand out to me are offering exclusive products and getting local and, if I had to chose one, it would be offering exclusive products. You can’t get beaten on the price of a product if you are the only one selling the product.

Quite frankly, the other three seem like things one should be doing already.

All that said, given the inherent differences in supply chain costs, it’s hard to compete against online retailers on the basis of price.

Doug Stephens
Guest
Doug Stephens
9 years 10 months ago

I’m with Martin on all aspects of this with the exception of loyalty programs. If your value proposition is clear and dominant, I don’t believe you need a loyalty program at all. The fact is, studies show that Walmart is cheaper than Amazon. Target is often cheaper than Walmart and Amazon is only 4.2% lower on average than Best Buy. Yet to hear it, you’d think this is all about price.

The truth is, most retailers are coasting on their pre-Internet business models, when what they require is a complete reinvention of their in-store value. They need to answer one simple question… If Amazon ships same-day, why would someone bother coming to our store? Until they answer that, nothing can help them.

Fabien Tiburce
Guest
Fabien Tiburce
9 years 10 months ago

All strategies are sound but only one truly addresses and pushes back the type of automated price-comparing algorithm-driven “weapon” of e-tail: offer exclusive product. Disparate products cannot be (easily) compared and can let the retailer build a value-proposition package around the product and the purchase and service of this product. E-tail only wins in a world where every good is a commodity. Folks, it’s time to re-introduce apples and oranges!

Adrian Weidmann
Guest
9 years 10 months ago

The five strategies put forth by Lenati are all good. If a retailer with a brick & mortar presence is looking to begin designing and implementing a strategy to address price transparency, I would suggest concentrating on focusing on developing a unique localized presence and designing a multichannel communication strategy. Concentrate on telling your brand story using video as your medium of choice and then publishing that brand story into the omni-channel environment. As we’ve read in this blog time and time again — stay true to yourself. Don’t use gimmicks and try to ‘outsmart’ your shoppers and customers. Pricing is not the only thing that is transparent!

David Biernbaum
Guest
9 years 10 months ago

Retailers need to stop whining about competition from online retailers and instead take full advantage of the fact that you are in-store and also online. Be the same store no matter where your consumer chooses to shop. Once you adapt that type of thinking, you won’t have to worry as much about Amazon.

Max Goldberg
Guest
9 years 10 months ago

For larger retailers exclusive products and multichannel will be important. Smaller retailers should focus on exclusive products and local products.

It’s interesting that no mention was made of customer service. Great customer service is worth money to consumers, as it saves time and effort.

Bundling products is anther way for retailers to have a higher register ring and grab a larger share of pocketbook, without competing on price.

I can’t see loyalty programs and bringing online information into stores as being influential. Everyone has a loyalty program, and most are too complicated or require too many purchases to have meaningful impact. Consumers using smart phones and small tablets will bring their own information into stores to make their shopping experience quicker and more productive.

Debbie Hauss
Guest
9 years 10 months ago

All 5 suggestions are important. Brick-and-mortar retailers can no longer ignore the fact that they need to provide access to Wi-Fi and online information to shoppers when they are in the store. They can’t hide from the competition.

Loyalty programs are key, but we now need to move them to mobile devices. Physical cards will become more of a hindrance than a help.

While “customer service” is part of all 5 suggestions, it has not been drawn out as its own strategy — and I think it should be. Best-in-class customer service will, in the end, make the difference between a shopper completing a purchase vs. leaving the store.

Raymond D. Jones
Guest
Raymond D. Jones
9 years 10 months ago

These are all valid strategies worth considering. However, they need to be consistent with the retailer’s overall strategy to be effective.

Another strategy is to provide added value services such as free delivery or installation. Online retailers make their money on these services while traditional retailers make their money on selling product.

“Local” is fine, but I would go further and suggest “personalization” as a strategy. This would include more customized products and promotions designed to offset low prices. Online retailers do a very good job of leveraging customer data to personalize offers. Traditional retailers need to get better at this.

Warren Thayer
Guest
9 years 10 months ago

Exclusive products are best in most cases, for the reasons already stated. If you’re not executing against most or all of these strategies already, don’t try to suddenly do them all at once. You’ll be stretched too thin. Go for what’ll give you the most low-hanging fruit first, then move along in order.

Nikki Baird
Guest
Nikki Baird
9 years 10 months ago
I’m with Ben on this one. While they’re all good ideas, in my mind the one to be most careful about is “exclusive products.” What makes a product exclusive can be very subjective, and I’ve seen retailers fall into the trap of thinking that just because it’s their brand on the label, this, by definition, makes an item exclusive. In order for exclusives to retain their perception of exclusivity, retailers have to invest in whatever brand cache goes into that perception, whether it’s expert staff, style know-how, or cutting edge design. And that’s the lesson that carries through all five points: doing any or all of these things isn’t enough to battle price transparency. Retailers need to invest in providing customer value. A loyalty program isn’t enough — it has to be a loyalty program that provides customer value. Same with cross-channel and bringing online information into the store. It has to be the cross-channel information and services that customers value. That seems like it would be a no brainer, but there are enough proof… Read more »
Robert DiPietro
Guest
9 years 10 months ago

You can’t be great at everything so you need to pick what is important to your customers. The key for retailers is to understand who their customer is and what’s important to them. Are customers shopping because they like “the hunt” or because they want the cheapest price of the best service? Figure out your value prop and don’t ever get beat on it.

Tony Orlando
Guest
9 years 10 months ago

The retailer of today, has to win over customers on several fronts. First the price of the product must be competitive, as loyalty goes out the window, if you are out of line on any major product. The customer service must be excellent, and honest.

Online orders must also be done correctly, and timely in order to match the Amazon experience, and lastly, you must back up what you sell (no lip service).

Mark Heckman
Guest
9 years 10 months ago

All of the points made are valid, but I believe that retailers who are seeking to avoid being price-compared and left behind, also need to guarantee that their own pricing will be guaranteed in the case that consumer buys an item that subsequently is reduced in price by that retailer either for a sale or other reason.

With that said, in my experience, expecting shoppers to pay more (significantly more) for the same exact item that could be purchased online for less, remains a dangerous strategy. There are on so many services and incentives that shoppers will consider worth the higher price, especially on commodity items that do not lend themselves to enhancement. Go there carefully.

I also still see too many retailers “competing with themselves” with different prices, deals and sale associate incentives for online product vis-a-vis the same item in-store. Retailer should structure their business to be indifferent to whether the consumer buys online or in-store. The shopper should see the retailer as one big, cohesive, consistent entity.

Brian Numainville
Guest
9 years 10 months ago

Offering truly unique products, and if your market is such that these can also be local, would be the strongest proposition. Hard to do all sorts of comparison on items that only you offer (but as others point out, skip the “fake” exclusive!).

Shep Hyken
Guest
9 years 10 months ago

All five strategies are good for virtually any business. Some more than others depending on circumstances. However, I’m in favor of a strong loyalty program for several reasons.

1. The business can offer incentives, special offers, etc.

2. The business can stay in touch with their community, which keeps the business front of mind and will hopefully cause the customer to think of that business first.

3. If a loyalty program is really working, it creates a bond. Loyalty is an emotion. Loyal customers want to do business with you, and may be willing to be a word-of-mouth promoter.

Add one more strategy to the five above — deliver amazing service. This is the value-added piece that separates you from your competition. The goal is to break away from the price commodity trap. Delivering an amazing service experience will help you do exactly that.

Camille P. Schuster, Ph.D.
Guest
9 years 10 months ago

Localization and loyalty strategies are good business so should be practiced to be competitive, period. Using technology to make employees aware of online information and to function as one store is also necessary to be competitive, because consumers think of your operations as one store already. Exclusive products offer a real opportunity for differentiation. However, the differentiation has to offer value that a retailer’s consumers want, not differentiation for its own sake.

Gordon Arnold
Guest
9 years 10 months ago
Each of these strategies have a place in the 21st century retail storefront. There is plenty of data and testimony as to the tricks, trips and traps found to be included and avoided when they are added to a market plan. Unfortunately the use of one or any combination of these plans has failed to curtail the effects of online retail market share increases. It appears that the online-only retailers and the credit card companies are having a field day with the retail markets almost at will. I am surprised at how few of the very large retail companies have not ponied up and built or bought their own online only retail companies and credit companies. What is in need of review and consideration by this group and others are the results of those investments like this which are not providing similar performance results as the pioneers of this new online business. I am confident that a comparison study of the old and new e-commerce ventures would reveal many enlightening differences starting with market perception… Read more »
Ralph Jacobson
Guest
9 years 10 months ago

To be clear, all five suggestions should be standard operating practice already, however, I realize this is not yet the case.

I believe a true loyalty program that includes both online and store-level services is a huge driver of differentiation. Remember though, a loyalty program is not simply giving mass, untargeted discounts to anyone whom signs up for a loyalty card. That is more of a frequent shopper program. I’m talking about services that drive a shopper to pass another store and shop at yours.

For example, what about more CPG supplier collaboration programs? How about tactical services like a grocery store “premier” checkout line that caters to large orders, with three people on staff to process (unload, scan, tender and bag) the orders?