November 6, 2014
Walmart considers online price-match guarantee
Potentially joining Target and Best Buy, Walmart is testing the matching of online prices of competitors such as Amazon.
The test, reported first by The Wall Street Journal, is being conducted in five markets: Atlanta; Charlotte, NC; Dallas; Phoenix; and northwest Arkansas.
The giant discounter currently only matches the print and online versions of the weekly ads of top retailers in each store’s area, although store managers have some leeway to match certain online retailers. The test is exploring the margin impact of a national rollout of online price matching.
At the time Best Buy and Target began matching prices of online competitors during the 2012 holiday season, articles arrived relating the challenges physical stores faced matching prices across the internet’s dynamic pricing engine. Both shoppers and employees were also likely to be frustrated by policy exclusions, such as bundled or limited-supply offers. Third-party sellers on sites such as Amazon are excluded by Best Buy and Target.
The moves were designed to deal with showrooming, howerver one risk of online price-matching was making price-checking more pervasive.
![[Image: Walmart Savings Catcher]](data:image/svg+xml;base64,PHN2ZyB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciIHZpZXdCb3g9IjAgMCAxIDEiIHdpZHRoPSIxIiBoZWlnaHQ9IjEiIGRhdGEtdT0iJTJGcHVibGljJTJGaW1hZ2VzJTJGZGlzY3Vzc2lvbnMlMkYxNzg5MiUyRnNhdmluZ3MtY2F0Y2hlci1zdGlsbC5qcGciIGRhdGEtdz0iMSIgZGF0YS1oPSIxIiBkYXRhLWJpcD0iIj48L3N2Zz4=)
Walmart’s test comes as it pushes to reclaim its position as retail’s low price leader. In June, it rolled out Savings Catcher, which asks customers to scan or enter a receipt number using an app. From there, Walmart matches local competitors’ print ads on the same item and sends an eGift card for the difference.
Without the labor, rent, maintenance and other costs involved in running physical stores, e-commerce sites are believed to have an advantage in being able offer lower prices. But the Journal pointed to research from Wells Fargo and pricing firm 360pi that showed that Walmart’s prices were even with Amazon.com’s earlier this year and had dropped nearly 10 percent lower in August.
- Wal-Mart Weighs Matching Online Prices – The Wall Street Journal (sub. required)
- Walmart Tests Matching Prices With Online Rivals – The Associated Press/Daily Finance
- shop with confidence – Target
- Best Buy Price Match Guarantee – Best Buy
- Holiday Price-Matching Could Backfire for Retailers – The Wall Street Journal (sub. required)
- By Matching Online Prices, Are Best Buy and Target Doing Exactly What Amazon Wants? – Time
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Recent Discussions
Discussion Questions
What do you see as the pros and cons of Walmart rolling out a national online price-match guarantee? On balance, would this type of program work to Walmart’s benefit?
Poll
Amazon has the luxury of not having the rent, labor, etc., of running physical stores, but Walmart has buying power. Walmart has positioned itself as the low-price leader and part of that position should be an online price-match guarantee. Walmart has won the consumer on price and will continue to win that battle of price as well as convenience.
The cons are depleting margins and losing the cash Walmart will need to continually refresh its stores. The store base is aging and will need some TLC.
Maybe it’s just my melancholy mood lately (U.S. politics does that to me), but isn’t the whole retail world just too much these days? Too much complexity. Too much angst. Too invasive. Too much work. Too much everything.
I had this response to all three RetailWire items this morning. Delivering goods by taxi because waiting for a day or two to get something is just an agony no one should have to endure. Getting groceries online so you don’t have to deal with the dreadful experience of engaging with farmers and merchants or the ghastly sensation of finding and feeling the best avocado or head of lettuce from the bounty piled up in an actual grocery store.
I think the big question as we head into Thanksgiving is, “How do we make retail experiences happy again?”
Price matching will allow Walmart to reinforce its brand positioning as the lowest-price retailer, but it will mean more price checks, which could negatively impact the in-store experience with longer waits. If Walmart’s staff is well-schooled in using the Internet, and can quickly check prices that consumers request, this could be a significant plus for the retail giant.
It’s ironic. Conventional wisdom says store-based retailers are at a disadvantage cost-wise, yet they ALL deliver better earnings than Amazon does. So who’s zooming who?
I have my theories on why Amazon has such a hard time making a profit, but Walmart certainly has room to price match. As Ian observed, to many of us the topic is depressing, but the race to the bottom goes on.
I think this would benefit Walmart like it would with most any other retailer. All Walmart has to do is just say they will match their competitors but still keep prices higher. Its the consumer’s job to call Walmart on the price match. For most consumers it will just go over their heads and they will assume they are getting a matched price. Sure Walmart will price their products on high volume items very competitively just like in their stores. To make the consumer shop around and price match is work and people don’t like to do the work. Besides, what good is a price match anyway? The only way the consumer comes out ahead is if a store beats the competitor, not just matches it. After I’ve shopped around with four or five online retailers, I would just buy from the cheapest rather than go through the red tape of getting the retailer to price match.
Many retailers are looking into the future and concluding that pricing will be transparent.
As Robert noted, some retailers (like Amazon and Walmart) have economics that support a position of price leadership. Others have to carefully balance their price image with the realities of their ability to sustainably match the leaders item-for-item.
One could argue that offering to match prices only encourages price comparison. In Walmart’s case, their brand and market positions are inextricably linked to price leadership, which explains why they invite comparison and appear to be embracing transparency.
It’s simple. If Walmart is going to be the “price leader,” they have to match price. And they have to match it from every legitimate retailer, online or off. (Even their own online store.) They should never want a customer to possibly think, “Oh, I can get it cheaper at Target or Amazon.” Even getting beat on one item can lead to the perception that the customer should start looking elsewhere for price, if price is the driving issue for that shopper.
Their approach must assume that by not meeting the price, they lose the sale. So the sale is not to be measured as a contribution to rent, labor, etc., it is an incremental contribution to overall margin.
Everything in the Walmart system is geared to the efficiency of moving merchandise through their supply chain. They do it better than anyone else. Therefore, at the same price, their margins should be better than anyone else. They have no choice. They must meet the competition.
I too, like Paula, am always interested when folks say that brick-and-mortar can’t compete with online due to all the overhead and alas, Amazon struggles to make a profit. When The Street finally puts its foot down on Amazon, things are gonna be a-changin’.
So what is the question here? Of course it is a big pro for Walmart to price match. They are all about lowest prices and with their buying power, they can certainly figure out how to make it work and maintain margins. And that’s just my two cents!
Of course this is good for Walmart. Losing share because Amazon has lower prices—everyone can agree that’s bad and that the real alternative. Amazon has been building distribution centers closer to their customers (the translation of that is nearly everywhere) for some time. That sounds like brick and mortar to me.
Now that sales tax is getting more consistent between online and offline channels, especially in larger states like NY and CA, price matching is an obvious strategy for any retailer in the mid to low end of the market. The playing field is level enough to make price matching vs. online practical.
It is always better to take an incremental sale than to let a customer walk out of your store.
Advertising a price match guarantee is the same as saying that you are not the best market price. This does not make much sense if you are posturing to be known for the lowest prices in retail.
I agree with David. This is definitely a win-win for Walmart because it benefits its image and shoppers…if they take the time and effort to enter their receipt number.
Pros: Operating physical stores is of course more costly than just an online store, so Walmart can definitely use the publicity and potential boost in market share. Last year was the first year that Walmart’s online growth eclipsed Amazon’s (30 to 27%). I think this is just another example that the tides could be changing on Amazon’s position as the go-to for the lowest prices.
Cons: Price matching is not price leadership, but it does keep up appearances.
Walmart has been willing to price match for years. Because of their enormous buying power, Walmart is a position to dictate to most national brands that Walmart receive “exclusive” packaging. Major brands sell their products in sizes or quantities that are unique to Walmart. If a consumer tries to comparison shop by UPC number, or SKU number there is no comparison. Nobody but Walmart carries those particular items.
What Walmart has done is re-enforce their image with consumers as the low price leader, and has done it by limiting their risk to the few items that aren’t in “Walmart Only” packaging.
When people talk about Walmart’s buying power, few people realize the power extends well beyond simple volume discounts.
Price-matching Amazon seems to be the theme of the week. Walmart is recognized as a low price leader. To do that they have to be…low priced! That may mean matching prices. However, Amazon has one (at least) big advantage: they don’t pay rent on retail space. Matching prices erodes margins. Higher overhead erodes profit. How low can Walmart go?
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Amazon has the luxury of not having the rent, labor, etc., of running physical stores, but Walmart has buying power. Walmart has positioned itself as the low-price leader and part of that position should be an online price-match guarantee. Walmart has won the consumer on price and will continue to win that battle of price as well as convenience.
The cons are depleting margins and losing the cash Walmart will need to continually refresh its stores. The store base is aging and will need some TLC.
Maybe it’s just my melancholy mood lately (U.S. politics does that to me), but isn’t the whole retail world just too much these days? Too much complexity. Too much angst. Too invasive. Too much work. Too much everything.
I had this response to all three RetailWire items this morning. Delivering goods by taxi because waiting for a day or two to get something is just an agony no one should have to endure. Getting groceries online so you don’t have to deal with the dreadful experience of engaging with farmers and merchants or the ghastly sensation of finding and feeling the best avocado or head of lettuce from the bounty piled up in an actual grocery store.
I think the big question as we head into Thanksgiving is, “How do we make retail experiences happy again?”
Price matching will allow Walmart to reinforce its brand positioning as the lowest-price retailer, but it will mean more price checks, which could negatively impact the in-store experience with longer waits. If Walmart’s staff is well-schooled in using the Internet, and can quickly check prices that consumers request, this could be a significant plus for the retail giant.
It’s ironic. Conventional wisdom says store-based retailers are at a disadvantage cost-wise, yet they ALL deliver better earnings than Amazon does. So who’s zooming who?
I have my theories on why Amazon has such a hard time making a profit, but Walmart certainly has room to price match. As Ian observed, to many of us the topic is depressing, but the race to the bottom goes on.
I think this would benefit Walmart like it would with most any other retailer. All Walmart has to do is just say they will match their competitors but still keep prices higher. Its the consumer’s job to call Walmart on the price match. For most consumers it will just go over their heads and they will assume they are getting a matched price. Sure Walmart will price their products on high volume items very competitively just like in their stores. To make the consumer shop around and price match is work and people don’t like to do the work. Besides, what good is a price match anyway? The only way the consumer comes out ahead is if a store beats the competitor, not just matches it. After I’ve shopped around with four or five online retailers, I would just buy from the cheapest rather than go through the red tape of getting the retailer to price match.
Many retailers are looking into the future and concluding that pricing will be transparent.
As Robert noted, some retailers (like Amazon and Walmart) have economics that support a position of price leadership. Others have to carefully balance their price image with the realities of their ability to sustainably match the leaders item-for-item.
One could argue that offering to match prices only encourages price comparison. In Walmart’s case, their brand and market positions are inextricably linked to price leadership, which explains why they invite comparison and appear to be embracing transparency.
It’s simple. If Walmart is going to be the “price leader,” they have to match price. And they have to match it from every legitimate retailer, online or off. (Even their own online store.) They should never want a customer to possibly think, “Oh, I can get it cheaper at Target or Amazon.” Even getting beat on one item can lead to the perception that the customer should start looking elsewhere for price, if price is the driving issue for that shopper.
Their approach must assume that by not meeting the price, they lose the sale. So the sale is not to be measured as a contribution to rent, labor, etc., it is an incremental contribution to overall margin.
Everything in the Walmart system is geared to the efficiency of moving merchandise through their supply chain. They do it better than anyone else. Therefore, at the same price, their margins should be better than anyone else. They have no choice. They must meet the competition.
I too, like Paula, am always interested when folks say that brick-and-mortar can’t compete with online due to all the overhead and alas, Amazon struggles to make a profit. When The Street finally puts its foot down on Amazon, things are gonna be a-changin’.
So what is the question here? Of course it is a big pro for Walmart to price match. They are all about lowest prices and with their buying power, they can certainly figure out how to make it work and maintain margins. And that’s just my two cents!
Of course this is good for Walmart. Losing share because Amazon has lower prices—everyone can agree that’s bad and that the real alternative. Amazon has been building distribution centers closer to their customers (the translation of that is nearly everywhere) for some time. That sounds like brick and mortar to me.
Now that sales tax is getting more consistent between online and offline channels, especially in larger states like NY and CA, price matching is an obvious strategy for any retailer in the mid to low end of the market. The playing field is level enough to make price matching vs. online practical.
It is always better to take an incremental sale than to let a customer walk out of your store.
Advertising a price match guarantee is the same as saying that you are not the best market price. This does not make much sense if you are posturing to be known for the lowest prices in retail.
I agree with David. This is definitely a win-win for Walmart because it benefits its image and shoppers…if they take the time and effort to enter their receipt number.
Pros: Operating physical stores is of course more costly than just an online store, so Walmart can definitely use the publicity and potential boost in market share. Last year was the first year that Walmart’s online growth eclipsed Amazon’s (30 to 27%). I think this is just another example that the tides could be changing on Amazon’s position as the go-to for the lowest prices.
Cons: Price matching is not price leadership, but it does keep up appearances.
Walmart has been willing to price match for years. Because of their enormous buying power, Walmart is a position to dictate to most national brands that Walmart receive “exclusive” packaging. Major brands sell their products in sizes or quantities that are unique to Walmart. If a consumer tries to comparison shop by UPC number, or SKU number there is no comparison. Nobody but Walmart carries those particular items.
What Walmart has done is re-enforce their image with consumers as the low price leader, and has done it by limiting their risk to the few items that aren’t in “Walmart Only” packaging.
When people talk about Walmart’s buying power, few people realize the power extends well beyond simple volume discounts.
Price-matching Amazon seems to be the theme of the week. Walmart is recognized as a low price leader. To do that they have to be…low priced! That may mean matching prices. However, Amazon has one (at least) big advantage: they don’t pay rent on retail space. Matching prices erodes margins. Higher overhead erodes profit. How low can Walmart go?