Should retail prices in-store be the same as online?
Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.
Meeting retailers in my travels across Europe the past three weeks, one of the most asked questions was: “Should prices in-store match those online?”
Can a retailer support the same prices in-store as online? From an omnichannel perspective, can retailers afford to lose potential customers if they do not to match their online prices in-store?
E-commerce has its own unique costs for massive distribution centers, infrastructure and systems. However, online selling doesn’t require expensive store leases, expansive labor requirements and other operating costs. For a leader like Amazon, inventory turns significantly faster than in many retail store chains, boosting gross margin profit.
Charging more in-store to support higher cost structures was possible when consumers shopped online as a separate channel. It becomes a quandary with bricks and mortar transformation strategies like “click and collect.”
Many store shoppers are still being asked to pay the higher “store shelf” price to cover shipping and staff expenses. In order not lose a store sale, staff even make the defensive offer: “We would be happy to give you the online price if you order it online and ship it to your home.”
But wait a minute — today’s consumers expect to shop and purchase anytime and everywhere. And guess what — if the store price is higher, consumers can simply whip out their smartphone in the aisle, order it at the cheaper online price, and walk over to collect the goods at the “Click and Collect” counter in store. Game over. The online price is now the store price.
Retailer store profit now depends much more on total basket than item price. Indeed, the key differentiators are now speed and service, not just price.
Enlightened omnichannel retailers are even adopting a strategy of matching competitors’ online prices in-store. They realize that a slightly lower product price is insignificant when compared to the highly profitable market basket of add-on sales and services, which are not sold nearly as much online.
With the growing price parity between online and stores, the retail store is becoming an omnichannel distribution point as much as a point of sale.
DISCUSSION QUESTIONS: Do omnichannel practices such as click and collect mandate the same prices in-store as online? Will this likely lead to stores having to adopt the generally lower online prices?