By matching prices, big-box retailers take on Internet
Big-box retailers are confronting their Internet competition head-on this holiday season.
As the peak shopping period kicks off this week, Target and Best Buy will be leading the charge against Amazon and other Internet rivals by matching prices that shoppers find online.
"The holiday is evolving," said Marshal Cohen, chief industry analyst at NPD Group. "It's a paramount issue, and retailers had to respond."
The first-time offer is a reaction to the practice known as "showrooming," in which consumers visit stores to evaluate an item but choose to buy it online for less. In fact, 75 percent of consumers will shop around online to look for a better price before making a purchase, according to a Discover survey.
In the past two years, Best Buy's share of the consumer electronics market has decreased from 17 percent to 15.5 percent, while Amazon's share has increased from 2 percent to 4 percent. Both Walmart and Target quit selling Amazon's Kindle products earlier this year, refusing to give sales to a pesky competitor.
Even Internet companies have started to match prices. Amazon will match prices on televisions this season, and PayPal will match advertised prices on many new items, including plane tickets.
All retailers, online or off, are trying to grab a bigger share of the $586 billion that is expected to be spent on holiday purchases in the 2012 season. Merchants take in 25 percent to 40 percent of their annual sales in November and December, according to the National Retail Federation.
Retailers realize that shoppers will look around for low prices, but by offering a price-match policy, they hope to transform them into one-stop shoppers.
Even if consumers don't ask for a price match, and most of them won't, advertising a price-match policy makes consumers perceive a retailer as a low-price leader. "It gives consumers confidence that a retailer's prices must be at or near the low end, even if they're not," Cohen said.
Most retailers with price-match policies have a long list of caveats and restrictions that might intimidate some shoppers. Most are standard, but shoppers should check for restrictions specific to the 2012 holiday season.
For example, some stores will only match prices from certain online retailers, and some will black out certain days around Thanksgiving.
Internet price matches will require a wait in line while store reps head to the backroom computer to verify that the price is still current, given that online prices can change several times daily.
Still, the savings can be real. In a survey by William Blair & Co., a financial services firm in Chicago, Target's prices are about 14 percent higher than Amazon's, Best Buy's about 16 percent higher and Walmart's 9 percent higher.