Does it pay for retailers to price-match their own websites?

Discussion
Photo: RetailWire
Jun 04, 2018

A study from Harvard Business School finds “self-matching” — or enabling in-store shoppers to request they be charged a retailer’s lower online price — can be profitable and may be the best way to support omnichannel pricing.

While extensive research has explored price-matching against retail competitors, the study claims to be the first to explore self-matching.

On the negative side, online prices tend to be lower and self-matching often results in shoppers “obtaining the lower online price when they would otherwise pay the higher store price, an effect we termed channel arbitrage.”

But the study identified ways self-matching can enhance profits or at least minimize the channel arbitrage:

  • Online competition dampening: If a rival doesn’t self-match, the self-matching retailer may be able to raise its online prices to offset any losses from shoppers asking for online price-matches in-store. The rival that doesn’t price-match will often likewise raise its online prices, lifting online margins for both.
  • Store competition dampening: With a self-matching policy, retailers can charge two sets of prices to two in-store shopper segments: those who pre-shop research online with intentions of asking for an online price-match and those who don’t. Self-matching allows retailers to still charge a higher price to those who don’t seek out the lower online price and may provide elasticity to raise in-store prices.
  • Overall webrooming dampening: An in-store shopper finding lower prices for a similar item at a competing store may be convinced to still buy at the current store at a higher price to avoid the time and travel cost of buying elsewhere. Being able to offer a lower self-match price may save the sale.

The study found the merits of self-matching depends on the product and competitive landscape. But with retailers apparently reluctant to match online and offline prices, self-matching was found to minimize the channel arbitrage and provide omnichannel customers with pricing consistency across channels.

The researchers wrote, “Broadly, our findings suggest that although a self-matching policy may at first appear to be an unprofitable but necessary evil resulting from a prisoners’ dilemma type situation, it has more subtle and positive competitive implications.”

DISCUSSION QUESTIONS: Do you see more pros or cons in price self-matching? Will self-matching satisfy consumer complaints about omnichannel inconsistency? Why are retailers apparently reluctant to offer the same prices online and offline?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I don’t think it’s a coincidence that we’re seeing more price continuity as retailers consider the long-term impact of their pricing strategy."
"The only thing worse than seeing uneven pricing is asking to price match the lowest available and being denied."
"Why game pricing? Why not make channel pricing differences clear and explain the rationale? "

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20 Comments on "Does it pay for retailers to price-match their own websites?"


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Mark Ryski
BrainTrust

How about price transparency for the sake of delivering a great customer experience? Mismatched offline/online pricing can leave shoppers feeling like they have been misled by the retailer. Not only can that lead to an immediate lost sale, but the long-term damage of the relationship with the customer is even more concerning. While it’s true that the cost of delivery can vary by channel, and that’s in part why there are price variations, these issues are substantially incidental to customers. I don’t think it’s a coincidence that we’re seeing more price continuity with online and offline as retailers consider the long-term impact of their pricing strategy.

Anne Howe
Guest

It really shouldn’t take a Harvard study to figure our that self-matching on price is a must-do from a shopper POV. But I’m glad HBS did this because maybe retailers will give the results some credibility and change their ways to keep customers from a one-click path to the competition.

Max Goldberg
Guest

Did this study involve any actual consumers? Consumers are frustrated with retailers that offer different prices for the same goods. Offering one price in-store and another online promotes distrust, which decays loyalty. It may cost more to sell an item in one venue vs. another, but consumer satisfaction vs. frustration needs to be taken into account.

Dave Nixon
Guest

Self-matching when asked in-store will retain the shopper to the brand being shopped and reduce the chance of abandonment and creating a negative experience. Why give your competition a chance to persuade them away, when you are having a one-to-one customer service moment? This can be a great differentiator for brands if they can figure out the cost model to make it work.

Michael La Kier
BrainTrust

Granted online and in-store have different dynamics as channels, but shoppers don’t want or need to know the ins and outs…after all to them it is a single retail entity. Having shopper-coherent pricing (when asked to match) is very important to drive trust and long-term shopper loyalty.

Bob Amster
BrainTrust

There are two ways to navigate through this quandary elegantly. One is to have one price from all channels. The second, if the first is not considered feasible, is to clearly state that on one channel this price is applicable to only purchases on this channel.

It is much easier for the consumer to only have to deal with one price and, if retailers can manage this, to have this be the preferred pricing model. Simultaneously, retailers can analyze the purchases on each channel and, over time, adjust the one and only price so that it balances the cost differences between channels.

Lyle Bunn (Ph.D. Hon)
Guest

Sure consumers would want the lowest possible price regardless of experience but the fact is that each type of experience brings its own value, and therefore merits different pricing. In-store offers service, try-on, tactile assessment and immediate fulfillment while line buying runs many risks and inconveniences. Same product, different cost structure, different price. Will the sale be lost across different fulfillment types and prices? Retailers can safely bet that it is minimal as “consumers’ will be done.”

Mohamed Amer, PhD
BrainTrust
Mohamed Amer, PhD
Independent Board Member, Investor and Startup Advisor
3 years 11 months ago

Any downside to self-price match pales in comparison to the goodwill a retailer builds with their customers.

Time to move away from maximizing each transaction while losing out on longer-term revenue and profitability gains made possible by price transparency.

With all the choices available to consumers today, retailers are looking for ways to encourage their customers to come back in their stores or websites. Why should they jeopardize that for a short-term gain that may sour that customer?

Shawn Harris
BrainTrust
Shawn Harris
Senior Director, Global Retail and Hospitality Strategy & Business Development, Turing.ai
3 years 11 months ago

Why don’t the prices just match without a shopper having to effectively call out the retailer? A shopper having to constantly check a retailer’s online price, to validate their in-store price, erodes trust. It also wastes a shopper’s time, which degrades convenience. It’s not customer-centric, and if retail is about price, convenience and selection, you now negatively impact the former two.

Brandon Rael
BrainTrust

From the customer’s perspective, they are engaging with one brand, one retailer and seeking a consistent experience that extends across all shopping channels. The fact that retailers have price differentials between their online and in-store offerings is concerning, to say the least.

This was more understandable 10 years or so ago, perhaps 5 years ago, when the brick-and-mortar and e-commerce channels were run by different merchandising teams. However, in today’s shopping universe, where relationships between brands and customers are built around trust and transparency, why would a retailer have different pricing structures across different channels?

Camille P. Schuster, PhD.
BrainTrust

How does charging higher prices in-store attract consumers to shop in the store? Having to shop online to be able to match prices in-store is self defeating — why go the store? Why are retailers complaining about low in-store traffic while charging consumers more for the privilege of shopping in-store? Different prices for different channels is not what the consumers mean by omnichannel. They still believe that all channels for the same store offer the same products at the same prices.

Neil Saunders
BrainTrust

Retail pricing should be consistent across channels. Consumers use channels seamlessly, so it really doesn’t make any sense for retailers to treat them differently in terms of pricing. Indeed, differential pricing will likely annoy consumers and erode loyalty and trust.

Also, charging less for online is ironic given that it often costs more to fulfill products.

Steve Montgomery
BrainTrust

Given that many customers research items online before heading to the store, price-matching when asked for is a must. Customers don’t care about the difference in the retailer’s cost to sell an item from its website versus from its brick-and-mortar stores.

As Max stated the bigger question is, should there be two prices in the first place? Given the cost differences it may not be possible for a retailer to do and price-matching, when asked, is the best they can do. From a consumer’s point of view that may be acceptable.

Doug Garnett
BrainTrust
3 years 11 months ago

It’s funny to me that this is even a question. Whatever we want to call the idea of selling across all channels, if a store wants its brand to remain vital for the long run, consumers need to trust that they’ll get the right deal regardless of where they buy.

To be honest I don’t even think there’s any losing money in the short term — because what’s never calculated in the short term is how many people walked away from a purchase because they were disgusted with pricing policies. Rather, the issue is profit that appears clear in a spreadsheet model with an extra few percentage points in price vs. profit that’s true in reality yet very hard to model in a spreadsheet.

Ralph Jacobson
Guest

Today, pricing strategy has to limit the “gut feel” inputs and optimize the transaction data store-by-store and match online pricing where appropriate and maximize top-line revenue elsewhere. The tools available today can take all of this guessing out of the decision process. Leverage what’s already out there.

Adrian Weidmann
BrainTrust

It’s hard to believe that retailers DON’T synchronize their on/offline prices! If there is one thing that being digital should have taught us is that there is no hiding! Digitally-empowered shoppers and transparency are one in the same. Any brand trying to squeeze margin dollars will be caught and the backlash can (and will) be costly. Apparently the obvious — isn’t! It takes a Harvard study to validate common sense and RetailWire to convert it to common knowledge.

Shep Hyken
BrainTrust

I know someone who went to a brick-and-mortar store after researching their purchase online. The retailer refused to price match their own site. The customer walked out of the store and chose to never do business with them again. Customers now shop using different channels and retailers must create a consistent experience regardless of the channel they use — and that consistent experience includes price.

Ryan Mathews
BrainTrust

Why game pricing? Why not make channel pricing differences clear and explain the rationale? Customers would then have the option to pay extra for service or less for a routine purchase. Matching strategies assume that prices are different and that difference is what fuels consumer agita. As to why retailers are reluctant — that’s easy. Nobody gets excited sacrificing margin points.

Min-Jee Hwang
Guest

Price variations are sometimes necessary, but they can make shoppers distrust the retailer. The only thing worse than seeing uneven pricing is asking to price match the lowest available and being denied. When there is a shopper at the register, ready to check out, retailers must save the sale. Even if it means slightly lower margins on that item — at the end of the day, that is better than creating a poor customer experience, losing that sale, and potentially losing that customer for life. Shoppers want transparency and to feel like they are being treated fairly, but when channel-specific prices are necessary, shoppers must be able to get the lowest price to continue shopping with that retailer.

Christopher P. Ramey
BrainTrust

Self-match pricing only if you want customers to trust you or to return on occasion. Nobody wants to play “gotcha” on pricing.

wpDiscuz
Braintrust
"I don’t think it’s a coincidence that we’re seeing more price continuity as retailers consider the long-term impact of their pricing strategy."
"The only thing worse than seeing uneven pricing is asking to price match the lowest available and being denied."
"Why game pricing? Why not make channel pricing differences clear and explain the rationale? "

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