Should retail prices in-store be the same as online?
Photo: RetailWire

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.

BrainTrust

"Having different prices online vs. in-store breaks trust with your customers "

Nikki Baird

VP of Strategy, Aptos


"This is a difficult question based on zone pricing, weekly specials etc."

J. Peter Deeb

Managing Partner, Deeb MacDonald & Associates, L.L.C.


"Quite simply, consumers expect the prices to be the same online and in store. They are not interested in the behind-the-scenes overheads..."

Lesley Everett

CEO and President, Walking TALL Training & Consulting, Inc.


Discussion Questions

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?

Poll

32 Comments
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Nikki Baird
Active Member
7 years ago

We’ve seen it in our research again and again. Retailers would love to have different prices online vs. in-store, arguing that the costs of each channel are different. But you shouldn’t be looking at your business through the lens of a single channel — certainly, your customers do not. Your costs are your costs, no matter which channel, and everything should be priced accordingly, not based on the channel the inventory moved through.

Even worse, having different prices online vs. in-store breaks trust with your customers — as a customer, I’m supposed to trust that you are going to take care of me and offer me a fair value. But if I’m standing in a store and looking at your website, and I find the website lower, that just makes me feel like a fool for trusting you when you’ve obviously decided that store shoppers are more stupid than online shoppers and therefore will pay more. Because whether you mean it that way or not, that’s how consumers will perceive it.

That said, there is absolutely an opportunity for retailers to offer different *promotions* online vs. store, and that’s something consumers understand and seem willing to accept. But you should still be prepared to match prices for the consumers who insist on it.

I believe retailers completely underestimate how damaging it is to break trust with their shoppers, and this is one area where retailers can do an enormous amount of damage, fast, if they’re not careful.

Ben Ball
Member
Reply to  Nikki Baird
7 years ago

Nikki, I was going to post on this thread — even though late to the party this morning. Then I read your post and realized I didn’t need to. Couldn’t agree more and I’d rec you multiple times if I could.

Sterling Hawkins
Reply to  Nikki Baird
7 years ago

Nikki is right. Omnichannel sales doesn’t mean channel-specific pricing. This is where personalization can be enormously powerful as long as the retailer can connect a consumer experience across in-store and online.

Max Goldberg
7 years ago

Consumers expect a retailer’s prices to be the same in-store as online. Period. Retailers need to factor this into their pricing calculations. I’m surprised it took so long for many retailers to figure this out, and at how many retailers still have different prices. Shopping at Gap makes my wife crazy. She’s learned how to game the system, and I wonder how many person-hours and costs Gap has incurred getting her products at their lowest price. The same is true for Target. It’s no wonder that these retailers are seeing their overall sales decline.

Paula Rosenblum
Noble Member
7 years ago

Our data has shown us that channel-specific promotions might be okay but, beyond that, the answer is a simple one — yes.

David Livingston
Reply to  Paula Rosenblum
7 years ago

How would retailers deal with zone pricing? Online is just another zone. Retailers cannot charge the same prices online as they do in the stores just the same way as they cannot charge the same prices in all their stores. Milk, eggs and bananas may need to be lower in one part of town to match a few nearby competitors. Then raised where there are no competitors or the cost of business is higher. Just like a hamburger at McDonald’s at the airport is higher than the one on the street. Some states have minimum markup making it impossible to lower prices to online levels.

Adrian Weidmann
Member
7 years ago

Not unlike Ferdinand Magellan who proved the world was, in fact, spherical, today’s digitally empowered shopper is proving that the shopping journey is omnichannel. Retailers need to come to terms with this reality and get over it. As noted in the article- ” … 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.”

The store, unlike online purchasing, should be a collection of immersive experiences. It is understood that the amount of purchases (basket size) is directly proportional to the time spent in the store. The happier the shopper is during her in-store journey, the longer she’ll spend in the store. Retailers should therefore create memorable immersive experiences.

Bob Amster
Trusted Member
7 years ago

The question points out how complex the omnichannel business has become. The optimal price is the price that averages the costs and quantities sold through each channel, but that is very difficult to do accurately. However, retailers can’t sell products at a lower retail price than the store price for fear of confusing or even upsetting the consumer.

Bob Phibbs
Trusted Member
7 years ago

I would turn the question around — should consumers pay more for items that are in short demand in-store when buying online? Too many retailers do not have full transparency online so a low price when added to basket says “checking stock” or “limited” only to receive notification they have to wait. I would suggest that the same prices only applies if the availability is exactly the same as a store that actually has the item. Anything less is apples to oranges.

Tom Redd
Tom Redd
7 years ago

It is simple — each channel carries the same price — except the off-price channel that may be available online-only. They are just different channels but all a retailer’s same business. In addition, who would want to do the accounting for dot-com pricing and store pricing? Physical off-price and online off-price do not have to match.

Some promotions should detail out “only available at the stores” and write off part of the profit as a donation to improving America’s health. Get people off their arses and out to a store!

Lee Kent
Lee Kent
Member
7 years ago

It’s all about the customer and customers don’t like inconsistent pricing. Transparency, transparency, transparency. If the retailer is going to play around with price, they better be upfront and transparent about it with the consumer or the consumer will take their pocket books elsewhere!

For my 2 cents.

Gene Detroyer
Noble Member
7 years ago

The problem of course is consumer perception. But in the long run consumers will get over it.

From a business point of view, if I can price the same item 10 percent lower online because my costs are lower and still make the same or even better bottom line, should I not do it?

The argument would be that I am driving my customers out of the store to online. So what? My company is making more money and likely selling more merchandise.

David Livingston
7 years ago

In-store and online are two different worlds. A store would need to charge higher prices in-store in places such as difficult inner city areas where crime, theft and lack of online abilities mean higher prices can and should be in place. Stores in higher-income, suburban areas might charge lower prices in order attract customers to experience the stores’ many offerings, rather than be disconnected through online shopping. Smart customers can experience the best of both worlds. I might buy some groceries online but I won’t be getting 50 percent off sushi on Mondays if I do. I need to go into the store to do that.

Doug Garnett
Active Member
7 years ago

In general I believe they should be the same — not to maximize short-term revenue and profit, but to build the trust relationship for consumers. That said, when there is a “reason” (e.g., online event, etc.) that rationalizes why there’s a difference, I find consumers to be smart enough that it’s just fine.

Amid this discussion, a very interesting question is whether online prices shouldn’t be higher in general than store prices. The economic studies show that online stores net out have worse financials than brick-and-mortar. In a more rational world, online stores are a special offering giving added convenience to consumers for which they should pay.

Of course, that can’t fly since online price cutting is so strong at competitors like Amazon. But it’s important to remember that, despite the claims, it nets out as more expensive to sell online and that retailers lose profit by sending store customers online.

Mohamed Amer
Mohamed Amer
Active Member
7 years ago

The article leads you to the answer: yes.

Consumers are not interested, nor do they care about, the internal cost structure of running the business. They care about themselves in terms of getting the best value for their money and being able to “trust” where they shop.

Both sides of the relationship are learning what it means to be in a highly-transparent omnichannel environment. Discrepancies across touchpoints in pricing, service, deliveries, packaging and so on get magnified and consumer response is immediate.

Focus on making your customers’ lives simpler, be consistent and perform across your brand’s touchpoints and you shall be rewarded. Your cost elements should be structured and optimized to deliver on consumers’ expectations and not vice versa.

Susan Gear
Member
7 years ago

Consumers are channel-neutral, they want to make their purchase whenever and wherever happens to be most convenient for them at that time. Having to worry about price differences introduces friction and complexity. That friction and complexity, if it doesn’t break trust, will most certainly adversely affect loyalty and share of wallet.

Gary White
7 years ago

Different prices online vs. in-store does break trust. As a retail expert I have discussed this issue with customers in-store as they toggle through their smartphone looking for the best price before they go to the checkout.

To retail management: This is a lazy way to squeeze margin at the major expense of customer distrust. Be more creative. Cut you cost away from the customer and deliver better-than-expected products and services and you win faster.

Shep Hyken
Active Member
7 years ago

I remember doing a little online research for a somewhat expensive purchase prior to going out to the store to purchase the item. I noted the different prices the online retailers offered. I ventured out to the store who had competitive online prices. When I got to the store, the price was higher. I asked if they would not only match online pricing, but their own branded online pricing. They refused and explained that the online company was a compete and separate division. I left and bought the same item at a competitor’s store down the street.

Brand confusion comes to mind. Confusing pricing strategies as well. If a brand is isn’t consistent, it will erode the customer’s trust. This is a new era of retailing, where the on-site and online experience are merging.

Click-and-collect is the same as buying from a salesperson in the aisle — at least to the customer. They are in the store or anywhere else with access to the internet. Either way, they pick up at the store. As mentioned above, the on-site and online experience are merging — and the best brands know it and are adapting.

J. Peter Deeb
J. Peter Deeb
7 years ago

This is a difficult question based on zone pricing, weekly specials etc. The airlines and hotels finally had to match their online sites with outside sites selling their rooms and flights. If a retailer has a rewards card and asks for the number they may be able to match the online request to their local retail store. This could be a programming and data mining nightmare! Eventually the retailer will have to decide how to proceed. However, matching prices may be the most effective and efficient way to maintain customers.

Liz Crawford
Member
7 years ago

Yes – of course.

Lesley Everett
Lesley Everett
7 years ago

This is really about building trust in a brand for your consumers — if the price differs online to store, it raises a question of why in their minds. Quite simply, consumers expect the prices to be the same online and in store. They are not interested in the behind-the-scenes overheads, they just want the comfort feeling of knowing they are not being ripped off, therefore losing trust.

Naomi K. Shapiro
Naomi K. Shapiro
7 years ago

Although the answer on the surface (that prices should be the same) seems clear, this is still a thorny question. Retailers MUST have a way to cover their costs or it’s a race to the bottom with themselves! To do so, I think retailers have to offer prices that cover their cost, while taking into consideration what their competition is doing — another facet of price strategy.

Craig Sundstrom
Craig Sundstrom
Noble Member
7 years ago

Here’s a thought: have good accounting that allows you to readily and accurately calculate profitability in various channels, and then set prices so they’re profitable in each. If you can’t match someone else’s prices (on a sustained basis, not some loss-leader promotion) then get out of that channel.

Mindlessly setting your price to match those of someone else — even if the “someone else” is your own online operation — is a good way to get, or really go, out of business altogether.

Jenn Markey
Jenn Markey
7 years ago

One shopper. One price. Sure costs may differ by location and channel, but that’s not a debate to be won in the court of public opinion.

Ken Morris
Trusted Member
7 years ago

I don’t think retailers need to have fixed prices for online and in-store. Most consumers know that prices are not created equally.

We have always varied pricing by company, division, zone and store and the next generation is by customer and context. Real-time retail in eCommerce, mobile and at the store level has created this opportunity and retailers and consumers are already embracing the technique. This is simply the evolution of pricing.

While there is a segment of shoppers that will demand the same online price in the store (when it is lower online) and, in these cases, retailers should be able to adjust prices at the checkout.

However, most consumers expect prices to be different as dynamic pricing is a way of life. We accept it without question from the airline and hotel industries and we will come to accept it going forward in other segments of retail.

Dynamic pricing has been around since I was the POS project manager for Stop & Shop Supermarkets from 1979 to 1981. It is and has been here to stay.

Personalized pricing is the future!

Peter Charness
Trusted Member
7 years ago

How quickly things change. Just after retailers go to all the work of figuring out zone pricing, and implementing complex software to manage that, the internet just levels the whole concept. As others have pointed out, pricing online has to be the same as stores, and competitive as well. Some retailers used to have long discussions about pricing by region and “what if a shopper visited two stores and saw different prices?” If that wasn’t ever going to be a daily occurrence, checking the price on the web is almost a guarantee today.

Kai Clarke
Kai Clarke
Active Member
7 years ago

Yes, online pricing should be the same as in-store pricing. Same retailer, different presence online and in-store, but should be the same price. Why would anyone accept different prices? This is perhaps the best question.

Ralph Jacobson
Member
7 years ago

It’s always confusing for the shopper to see price variances across channels for the same retailer. However, it certainly is simple enough to run an online promo and clearly state “this price is only available on this site.” Additionally, of course the costs vary across channels. Yet, the more you “co-mingle” those costs with such services as “BOPIS” and others, you can even out the spikes in cost overruns in specific channels.

Kevin Sterneckert
Kevin Sterneckert
7 years ago

I have great respect for those who have contributed to this discussion thread. I know many of those who have opined. Here are a few things to consider. First, when have we ever had a situation in retail when we could say pricing was easy? I believe it’s easy to say that the price should be the same across all channels. Second, Amazon changes three million prices every day. If you are a retailer who has a strategy of competing aggressively with Amazon that results in price changes every day or every hour or even every minute, what retailer has the labor budget in stores to make sure that the shelf price matches the digital commerce channel price. ESL is not the answer; how would you explain a price that is changing right before the customer’s eyes?

So, given these very real challenges that can not be overcome, the retail price can be different across channels. Generally, many believe that consumers expect the same price across all channels, however, actual consumer behavior demonstrates a very different attitude toward consumer price preferences. Channel independent pricing presents a significant competitive weapon requiring clearly stated intentions with customers and proper supply chain coordination.

The concept of consumer-centric retailing advocates an alignment of strategy with a careful examination of the consumer and their behaviors and expectations. As companies focus on channel pricing strategies, winners will listen carefully to how their current and future customers wish to interact with each channel. They will include the expectations of value, promotions and individual offers that are extended through each channel. The very definition of listening to the consumer has expanded beyond the purchase behaviors of the four traditional walls of retail. The pursuit of listening to the consumer should include a detailed and sophisticated analysis of unstructured social data (available in blogs, and social networks).

Remember as a consumer sees a brand, like Sony, they are presented with number of channels for a single SKU. The last place a retailer should want to be is looking in from the outside from a purest point of view that causes all pricing across all channels to be identical. True consumer behavior shows the consumer does not expect consistent channel pricing and a strategy to do so may limit competitive opportunities to reach available consumers. With new sources of consumer information (ie. social media) representing a direct channel of insights, retailers will unlock a key price optimization opportunity.

Consider this question. Should you charge the beer consumer a different price at 5pm on Friday vs. 10am on Tuesday? Today, promotions are largely dependent on retail circulars that communicate the promoted goods at the same price during the promotion period, yet consumer demand changes throughout the promotion period. Retailers should consider using price and promotion optimization solutions across all channels of commerce. Significant and reliable returns are well documented within the brick and mortar channel and similar benefits are also available to alternate channels of commerce. Finally, the impact of channel specific pricing strategies will impact demand by channel and the supply chain must be prepared to respond to these changes in demand.

The consumer is the winner when pricing is flexible and focus on behaviors and expectations. Offering a one size fits all does not reflect what the consumer REALLY wants as measured by demonstrated behaviors. Personalized pricing is beginning to take hold and I expect more retailers will follow over the next several years.

Carsten Wulff
Carsten Wulff
7 years ago

For the Millennial consumer and especially for the Generation Z, there is no differentiation between channels. They expect the same price across channels. If the store associates are well trained, they will make sure that the store purchase will increase through additional sales.

Adam Silverman
7 years ago

It’s clear — customers have stated they want unified pricing in all channels. All the research from top analyst firms show this. However, for retailers to meet this expectation means that they either miss out on maximizing margin dollars, or they run the risk of carrying inventory too long.

Markdown optimization has been around for a long time, and it is a proven strategy to get rid of items in a store so that the store can buy new merchandise. New merchandise is great for customers! In a world with unified pricing in all channels and stores, selection will break quickly and customers will be disappointed. Imagine ski jackets selling for full price in Florida, just so that the eComm channel can maintain margin for New England shoppers. In this scenario, Florida shoppers will be at a disadvantage and have a poor experience since the store cannot bring in new merch until the old sells through.

An alternative? Ship product around the country — and for those in retail, we know this is an expensive proposition. Differentiated pricing by channel is here to stay, and hopefully I’ve made the case that it’s not a terrible customer experience.

Adam Simon
7 years ago

There are two conflicting economic realities — one is that prices are set now by ecommerce — we see this in the UK where retailers openly state that their prices are not more than Amazon. The second is that stores are more costly to run than ecommerce. You cannot in the long-term set your selling price in one economic reality, and apply it to another with a different cost base. If you try as one respondent said, to set your price at an average reflecting both, you lose out to your competitors in ecommerce. So this great question posed by Dr. Petersen, highlights another economic reality — stores will only be able to compete in the omnichannel world if they shrink in size and lower their cost base.