Target Invites Showrooming With Price Match Offer
If you can’t beat them and you can’t join them, then match them.
Target’s decision to match prices on Amazon.com and other sites during the holiday season must have worked out pretty well because the chain announced that it is instituting the policy year-round.
Mark Schindele, senior vice president of merchandising operations at Target, told The Associated Press that the chain regularly monitors the prices of thousands of items sold by Amazon and its competitors. The decision to offer the price match guarantee is Target’s way of assuring guests that it is committed to keeping their business.
"Guests can confidently shop at Target every day for the best value in retail," said Gregg Steinhafel, chairman, president and CEO, in a statement. "We know that our guests often compare prices online. With our new ‘Price Match Policy’ and the additional five percent savings guests receive when they use their REDcard, Target provides an unbeatable value."
Discussion Questions
Is Target’s price match policy the right way to address consumer showrooming activity? In the final analysis, do you think the policy will help Target gain more business from brick and mortar stores or websites?
Ultimately, I think that this move will be a wash for Target, but I could be wrong and they’ll drop it if losses mount up. I defer to my colleagues with much more merchandising/pricing experience than me to weigh in, but the math that I was taught in B school indicates that you can’t run a store as efficiently as a virtual supplier. So, it’s hard to see any long-term viability in this on the surface, but the advantage may be in the details.
If they switch enough of their merchandise mix to unique SKUs, if in time, people get lazy about price comparisons, if the buzz increments gross revenue enough to offset the lower margin, if, if, if… it will be good. But I still think for Target, it will balance out with negligible effect on them and on their competitor (Amazon).
Target’s image fosters good value. The match policy confirms their commitment to good value. As an all year round policy, current Target shoppers will feel encouraged to do more shopping at Target…without the risk of forgoing a good deal somewhere else. As for new Target shoppers…undoubtedly there will be more of those, but they will likely be the newbie’s to the match policy arena along with some diehards who also need to confirm product availability. As long as the reduced profits aren’t greater than the revenue increase, this policy could be a winning formula for Target.
People like to shop at Target, and if they know Target will be matching Amazon’s prices, I believe it will boost sales for the mega retailer.
Whether or not this is a policy that would be successful for other retailers is an interesting question. Many smaller retailers may not be able to sustain price matching, and may not want to, if they have other unique services and offerings to attract customers and keep them in the stores.
This is a smart move to reassure Target shoppers that they are being “smart” in their buying decisions.
However, price-matching isn’t the only weapon in the arsenal against showrooming; Target is also using product “exclusives” which foil showrooming by making comparisons difficult. Taken together, this is a two-punch approach which will help Target win in the showrooming battle.
If you want to race towards the lowest price, then price match is the way to go. It is not, however, the way to build a successful business, unless you are Walmart. The strategy will garner PR for Target, but it will not improve the company’s sales or bottom line.
Reports that I read said that few Target customers took advantage of price matching during the holiday season and that even with price match, Target’s sales were flat.
Target has been down this road before. The last time it tried to compete on price it failed. Target’s core story is cheap chic. Why would its management now want to shift that story to price?
This is a big win for consumers who don’t want to pay more for something they know is priced lower elsewhere (even on the same retailer’s web-site).
For retailers it trades margin on an individual product for increased loyalty/wallet share from customers. To date, this has been a difficult tradeoff for store-based retailers to make (and many still don’t).
Going forward, this will be part of the inevitable shifts in store merchandising and inventory strategies, resulting in less breadth and depth in the physical store as well as new definitions/expectations of “stores.”
Walmart offers price matching guarantees, but only on advertised pricing—not every day prices or internet pricing. Target is matching internet pricing (Amazon, Toys “R” Us, etc.) which will help gain the sales of “showroomers.”
I believe the brick and mortar Target stores will increase sales because shoppers can receive price matched items on the spot and not need to wait for online retailers to ship to them. And hopefully the “showroomers” will pick up other items while in the store and increase the basket size.
Very bad idea. Any tactic that calls more attention to price as a driver of value is a mistake. Retailers succeed by emphasizing service, selection, quality, and convenience—not price.
This is a really bad idea for Target and the whole retailing sector. They can’t win this battle against Amazon and shouldn’t even try to fight it.
No doubt this will help Target move merchandise. Sure there will be glitches and loopholes that will make both the customer and Target mad. We went through this last night trying to find a Target in the metro area that has a certain product in stock. If you have to drive past three Targets to finally find one with the product in stock just to get them to price match minus 5%, it not really worth my time. Sometimes the 5% isn’t worth it because you end up paying sales tax where as you might not buying online.
Price matching is absolutely a correct move by Target. They have already put the products on the shelves and absorbed the costs associated with that. They may as well save the sale, even at lower margins, than lose it altogether.
The key going forward will be the analysis and merchandising necessary to regain the revenue and profits that were not part of the original business plan. This will require some in depth analysis and departmental and item knowledge to figure out the formula. Unless you are losing money on matching, it is a good tool to maintain customers and sales.
Matching lowest prices
May develop more sales
But cutting to the bone
Could cause a fiscal crisis.
A happier or sadder Target will be
Upon arising the morrow morn
Then knowing the way to the sage
Is building value not being pricey.
Customers who come to your store because you are the lowest price are loyal…until they find another store with a lower price.
That said, a customer “showrooming” a particular item will most likely buy other items. It’s also a chance to build a relationship and a little good will.
If a customer comes through into the store, then it is the goal (dare I say responsibility) of the store’s employees and system to keep them as customers. If a low price—or a price matching policy—gets the customer in the doors, then the retailer has the opportunity to nurture and grow that relationship.
The landscape of retail is changing. Retailers must learn to take advantage of new technologies versus fight them.
The success of this strategy will come down to the execution at store level. If Target handles it smoothly, with a practiced and continuous learning view, they will make it succeed.
The simple reason for that success is that they are placing a large number of their customers at the center of the equation. Many consumers want and need to be in this control situation.
Showrooming is not going to go away. And, Target’s approach of tying in their REDcard will help them continue to maintain a strong link to their best customers.
It is good to see Target is no longer looking at showrooming as a threat, but now leveraging it as a marketing opportunity. Perception is reality and if consumers know you are willing to match online prices, they feel more confident that your pricing is either as good or better than online. The advantage for Target over online retailers and competitors is the shopper is in-store and ready to buy and use the item they are holding now.
By promoting match pricing, Target has in essence taken price off the table. Now they can focus on what they do best and what customers truly love them for; a great in store shopping experience with top National Brands, unique merchandise, helpful associates and wonderful clothing lines exclusive to Target. Sears, Best Buy and other major retailers, take note.
Brick and mortar has a higher overhead and cannot compete with online retailers on price alone. However, I do not think that this means that retailers like Target can concede the pricing battle to the likes of Amazon. By price matching, Target is not conceding on price and will continue to drive traffic and purchases in their stores.
Since Target trialed this during the holidays, we can assume that they did the analysis to insure that sales volume increased enough to cover the decrease in margin on the price matched items for the policy to have a positive net impact to overall profit.
Target hasn’t broadly used a “lowest price” strategy. Instead, the reason we shop there is we get great value at a low price. And that’s my concern about the campaign—it violates the Target brand.
On the other hand, I’m guessing their choice to continue the policy could have come because they found out it didn’t end up costing them anything or much. In which case, its a low cost tactical win in the fight against the online mythology of Amazon.
That said, Target’s long term strategic win will continue to be from leveraging their biggest asset vs Amazon (stores and brand) in order to beat Amazon rather than merely price match.
Net out… I don’t think it’s a big deal that they’re doing this. And I’m concerned that they are paying for this low-cost tactical win with long-term brand harm.
A price match AND a 5% discount for using their REDcard—might motivate even me to endure the hassle of getting a price match. On Black Friday I learned they would not price match a Walmart ad featuring a kids’ DVD movie (it was not an item that was limited to x number per store). I just happened to be shopping at Target and wanted to save the extra stop.
Peter is 100% right. Bad idea. It puts greater pressure on their operations to complete the sale to the customer’s satisfaction. It calls out price when Target is not all about price. Giving in to pressure and at the same time addressing a small percentage of consumers that practice this “game” to get the best deal. Big news, big hassle internally, likely bad effect on their earnings.
Prof. Fader’s POV deserves more consideration here. He is right that price alone is a poor foundation for a market position unless you are the sole EDLP champion, which Target most definitely is not.
As a declared policy, however, Target’s price match promise may create more in good will than it costs in lost margins. Intensive price comparison is already a reality on higher-consideration purchases, but the effort is tiring, dull and a drain on shoppers’ time.
Price assurance can allow shoppers to feel more successful with less exertion. Perhaps that is what Target has discovered through its battle with showrooming.
Target is big enough to try this, and they better get it right without making customers angry with all the exclusions and excuses, and hoops to jump through to get the same deal as Amazon. Can they profit incrementally from this? The race for market share is now gone insane and with everyone selling the same thing, it just makes it worse for the bottom line.
Anyone who is in retail, better keep dreaming of ways to make your customers happy without selling your soul to the lowest bidder. It could be a bumpy ride for the “average Joe” retailer out there, who has not stayed ahead of the learning curve.
I’m going to go out on a limb here and say that this move will be good PR for Target and might spur more loyalty and perhaps a few new customers but…I really don’t think price matching is the most important thing to every customer.
If you are shopping online yes, price matching is part of the game, then qualification of the supplier. You may opt to pay a few dollars more to use a supplier rated higher. As for shopping in-store, if you know Target has very good prices and the product is right there, no shipping, walk out the door with it, many folks are just fine in paying a little more. Having the option might close a few more sales, but I just don’t believe that showrooming has the impact a lot of folks are giving it, IMHO.
If you’ve ever ad-matched at Walmart, you can do it right at the register—you don’t even need to have a copy of the competitor’s ad. In theory, they will confirm the competitor’s price in their own copy of the ad, but in practice most I’ve come across just take your word for it. Easy and convenient.
At Target, you have to ad match at guest services, not at the register. Who wants to have to stand in line behind people returning items and complaining about things, just to buy your stuff?
Yes, Target is upping the ante in matching online prices, which Walmart doesn’t do. But their process is so inconvenient and cumbersome that it seems more about projecting a low-price image than inviting people to actually take them up on their offer.
“We don’t see a lot of price match activity in our stores… we don’t expect this to be meaningful.” That was Target’s CEO in November, ahead of the holiday price-match offer. Any reason to expect it will be any more meaningful now?
With the progress online is making with shoppers, ten years from now, “showrooming” will be one of the few reasons that shoppers go to a brick and mortar store. Retailers who start thinking about “showrooming” as a positive to their mix now will have a leg up in the future.
It’s the right way for Target. They have the scale and the market position to implement this effectively and they need to compete aggressively with Amazon and Walmart. For most other retailers, price match is a race to the bottom and I would not advise copying Target’s strategy here.
Since this is not a special area of expertise for me, I’m taking cues from both Jamie Tenser and Peter Fader. However, the thought that immediately came to mind is that this needn’t be any kind of operational focus, but simply a PR move to reassure shoppers. My management instincts would be to do it, based on my long-standing philosophy of “Get the problem, then solve it!” This IS the basic design principle used by IKEA: we want a table like this, at such and such price.
I know this can be reckless—and I can be—but in a sense it says, IF Amazon can afford to sell this for this price, what do we have to do to be able to afford it too? In other words, get the problem: we’re going to sell THIS item for the same price as Amazon. And then solve that problem. Hint: you don’t have to actually do anything other than price match and then see where you are bleeding and stanch the bleeding ONLY for the most serious losses.
I think I’ve just revealed the kind of thinking that went into my own company growing at 30% annually for 20 years, from 1989 through 2009, when we completed the sale of the company.
So, why is this different from what Walmart is doing? It’s not. Does Walmart’s price matching policy influence me one way or another? No. This is a “me too.” It is not a “here’s what we can offer as a reason to shop.”
The only point of differentiation it provides is that it is completely different from their philosophy used to stop selling the Kindle. That made little sense. This is a “ho-hum,” or a “so what?” It is not a gain from B&M or the web.
What it says to me is that they know consumers are shopping. It says they know they aren’t the best priced. It says they will give you a price from a competitor, but only if they have to do so. Is that really a value generator? Is that really a point of differentiation?
One aspect that I haven’t seen addressed is the role that Target’s brand strategy plays in all of this. One of the policy criterion is that comparison items must be of the same “brand name.” Target stores are filled with proprietary and private brands, with robust “good, better, best” tiered selections in several categories including as food and home. It’s Up & Up brand in consumables covers off on a swath of opening price point comparison possibilities. This one criterion ensures that Target need only match the remaining national brand items in exactly the same quantity (don’t fear the dollar stores!) and “item number” (interesting gray area). Much ado about little at the end of the day.
When I shop, I simply hate having to get off my butt and walk the stores. No time. So I buy online, and only have to drive half a mile to my UPS Store. The only problem is disposing of all the cardboard I accumulate from shipping cartons.
So, Target’s price match policy means nothing to me and I’m a consumer with a capital “C.” (Hey, that rhymes! Eat your heart out, Gene Hoffman.)
Still, one can’t overlook Target’s decision to expand the program to year-round. Is it a test? We won’t know until Target publishes the actual increases they believe they received from the holiday program.
Okay, so why not go the distance, Target? For the sake of example, consider the functionality/user experience/architecture of the “Pin It” button in Pinterest.
Suggestion: Target, Walmart, others – Create your own downloadable bookmark bar/web browser widget that shoppers, who are on Amazon site, can click to lift the price information from the page.
How it works: : a. Looking at an item on Amazon? b. Click the Target Widget c. We’ll tell you if “we got that” d. And you tell us if you “want that” e. And here is the added value of “doing that” (warranties, upgrades, personal closet, suggestive selling, local donations).
You could collect and hold the items for pick-up, the key is to turn the virtual world into an executable showroom. Reverse the Curse (as we say in Boston.)
Now, the experts might say that this is catering to unprofitable customers – so try it somewhere – one location – I don’t know – how can I add value to such great comments!
Have any of you ever tried to use a smartphone in a Target? I have never been able to get a signal anywhere behind the checkout. Target might be advertising this, but I don’t think they are doing any more than offering lip service. If they are going to the trouble of making their facilities “no signal zones” then I don’t see how they can be promoting any type of comparison shopping.
Showrooming is certainly having an effect, especially amongst the younger generation: according to Accenture, 72% of of consumers aged 20-40 use mobile devices while in-store to compare prices, but the majority leave before making a purchase. That said, in my view price matching policies are inherently reactive in nature, and place a burden of inconvenience on the shopper.
Price matching policies do help with consumer perception, but they are no match (pun intended) for being “right-priced” in the first place—and the only way to achieve that is through proactive and ongoing market price monitoring.