Retailers Dread Phone-Wielding Shoppers

Ponca City writes "The WSJ reports that until recently, retailers could reasonably assume that if they just lured shoppers into stores with enticing specials, the customers could be coaxed into buying more profitable stuff too. But now, marketers must contend with shoppers who can use their smartphones inside stores to check whether the specials are really so special. 'The retailer's advantage has been eroded,' says analyst Greg Girard, adding that roughly 45% of customers with smartphones had used them to perform due diligence on a store's prices. 'The four walls of the store have become porous.' Although store executives publicly welcome a price-transparent world, retail experts don't expect all chains to measure up to the harsh judgment of mobile price comparisons, and some will need to find new ways to survive. 'Only a couple of retailers can play the lowest-price game,' says Noam Paransky. 'This is going to accelerate the demise of retailers who do not have either competitive pricing or a standout store experience.'"

Comments

So, the system works?

[bytethese]

'This is going to accelerate the demise of retailers who do not have either competitive pricing or a standout store experience.'

Be creative? Negotiate better wholesale costs so that you can offer your customers lower prices? If not, someone else will. Isn't that capitalism?

If a restaurant had better food, a nicer atmosphere and cheaper prices, wouldn't you frequent that place as well?

Re:So, the system works?

[Abstrackt]

If the fact that Wal-Mart is the only local place I can buy my clothes and groceries is a sign the system is working I'm not so sure I want it to work. I'm not saying we should regulate the hell out of everything but I really miss having other options when I shop.

Re:So, the system works?

[mdarksbane]

I regularly pay a little more for goods that I know less about if I got good service. As long as the price is at least vaguely comparable, being able to physically touch and try out something is worth a bit of money to me. Especially when it's something where the salesperson helped me look at options, understood what I wanted, picked the best value for me, etc, and didn't just hand me which one they were pushing that week.

Of course... sometimes the markup is too high. I really wanted to buy a TV locally, but they "don't price match amazon," which means that the same TV at amazon was $1500 less... you've got to at least make the same ballpark.

Re:So, the system works?

[cygnwolf]

Not to self. Preview is your friend.

Re:So, the system works?

[scourfish]

I'm not saying we should regulate the hell out of everything but I really miss having other options when I shop.

In the city to which I'm currently residing in Kentucky (you know, south of the Mason-Dixon, where all of those gun-toting conservatives people love to make fun of so much) there is a Walmart, at least 2 Meijers, several Kroger's, a bunch of specialty ethnic stores, a whole foods type co-op, along with both chain electronics stores and several specialty shops all over the place. "Other options" are doing just fine.

Re:So, the system works?

[erroneus]

I wouldn't go so far as to say that it's working. People are STILL pretty stupid. Have you noticed that brand markers and logos are getting larger and larger? This is because they are trying to convince the public that they aren't wearing clothes so much as they are wearing labels. (I would say they have been pretty successful so far!) So there's still plenty of room to exploit common consumer stupidity.

Re:So, the system works?

[kenrblan]

I'm with you on this, and that is one of many reasons I try to avoid Wal-Mart. If the end game is that only one store is left in the race to the bottom on price alone, the end result is a total monopoly. At that point, the winning retailer (Wal-Mart) is no longer required to keep the prices low since there is no longer a competitive need. Of course, the free market capitalism evangelists would claim that another store is free to open to compete. The problem with that is the barrier to entry would be beyond any realistic capability and the competitor could be easily squashed by a short term price adjustment from the monopoly. The good news is that there are currently enough competing stores that actually beat Wal-Mart on some prices, quality, or convenience to keep that from happening on the national level. The problem is that those retailers primarily exist in the larger metropolitan areas and not in towns of populations below 50,000 where competition is desperately needed.

Additionally, the smartphone apps are probably shedding the light on the fact that stores other than Wal-Mart often have a better price on many items. That is something I had observed in comparing prices on groceries when a Super-Center threatened the existence of the local grocery stores in the town in which I previously lived. Just because a store says it always has the low price in its advertisement, it doesn't make it true.

Re:So, the system works?

[Lumpy]

Yup, so you cant complain when the only store you can shop at is Walmart.

Walmart can buy 8000X more volume than any other store can so they can undercut everyone.

Fortunately most american shoppers are horribly shallow and dont care most about price but trendyness..

Abercrombie torn up jeans at $150.00 and a Aercrombie Sweatshirt that is lower quality than a Fruit of the loom but says "ABVERCROMBIE" on it and costs $65.00 compared to $19.00 is far more important.

I gotta look like I have money.... Oh and can you drive? I need to let mt BMW 525 sit for a month as I'm close to being over miles on it's lease. And it lets the neighbors see I have a BMW.

Re:So, the system works?

[natehoy]

Here's the problem. Running a brick-and-mortar store costs money. Not only do you have to have the store, but you still have to have the product shipped to the store and warehouse excess inventory, which is not quite as expensive as shipping it to the customer directly but not all that different. The overhead of the retail space (rent, heat, etc), the employees, the display models which usually have to be sold at a discount or disposed of at a loss, and all that makes the per-sale cost of doing business as a retailer significantly higher than that of a pure warehouse operation. You simply can't make up even a fraction of that by negotiating lower costs than what Amazon or NewEgg or Buy.com can get the same item for. Even if you can get a lower cost by 15%, your store costs will gobble that up and more. And you aren't getting lower costs than Amazon, their sheer volume ensures that they will probably have a lower cost than you do.

If you go into a store, that retailer is paying a great deal of money to show you that product on the display rack and allow you to twiddle with it. He's paying a great deal of money to have the item you want sitting on the shelf ready for immediate purchase. He's paying a great deal of money to have someone sitting there ready to at least make a half-assed attempt at answering your questions. He's not paying any less than his mail-order competitors for his product. In order to make a profit, he's got to charge more, so he has to figure out ways to get you in the store buying things he can make a profit on.

I'm not at all suggesting that you "owe" that retailer a sale - it's a free country. But if you go on Amazon and mail-order it to save $10 after spending an hour in a local retail store looking at the item and having their employee answer questions, and enough people do it, the retailer can't make a profit and is going to go out of business. You'll lose the local display of products that the retailer offers you (not to mention the local jobs that retailer offered your community, and the immediate availability of product when you're in a hurry to get something).

It's your decision. I'm just suggesting that throwing your local retailer a bone every now and then will help keep them around. They can't compete with the Amazon's of the world in price, their cost structure is much higher. But they offer you services Amazon can't (immediate availability of items, in-person local returns, display models, live human beings to answer questions, local jobs, etc).

If you don't value those services, then by all means shop from Amazon. Just don't crybaby when your local shops close up and you have to drive two hours to see anything in person, or you are limited to an in-person view of only what your local Wally World carries. Wal-Mart keeps their prices low by engaging in really, really strongarm price negotiations with their vendors, but their selection in any one type of item is usually pathetic and limited to the cheapest and junkiest of the product to keep the prices low.

Again, I'm not suggesting that the retailers have any sort of right to demand your commerce. They don't. The displays are there for you to use. It's a good idea, however, to acknowledge occasionally that those displays cost a lot of money, and consider whether you want them around for future shopping when looking at a few bucks' savings on an item you want. They simply can't match mailorder pricing. So you'll have to decide whether you want to see things before you buy them, and whether that service is worth anything to you.

Re:So, the system works?

[Antisyzygy]

I hate salesmen. The last guy I went to at a Conn's (electronics/appliance store) kept bothering me about buying a big TV. All I wanted was a cheaper TV and I had a size already in mind. He literally would not stop following me around and telling me to "OOooh! This TV is so nice though and there is great financing". I can do my own research.

Re:So, the system works?

[MightyYar]

you've got to at least make the same ballpark.

Exactly, I just willingly paid $50 more at a brick-and-mortar plumbing supply place for a specific toilet that was cheaper online. For one thing, I could go over and pick it up immediately, and for another, I didn't have to deal with having a delicate thing shipped to me.

Re:So, the system works?

[bytethese]

See, reference the part where I said Mom and Pop

Valid argument, but see the part above about creativity. :) For example, when I have choice in flying, I sometimes choose JetBlue even though there are cheaper options, because the experience as a whole (Terminal 5, crew, TV in seat) is usually better than the competition. Or when I needed a large screen TV. I went to Best Buy, Circuit City (when they were open) and a local shop here in NYC called J&R. I ultimately went with J&R.

Re:So, the system works?

[Pojut]

Admittedly not the way business is going these days, and this article is highlighting another nail in that coffin.

The very nature of capitalism requires steadily growing greed and want for larger profits. The only way a company can continue selling decent-quality products at realistic prices is if it has no desire to expand.

For some reason, "not expanding" is the same thing as "a business slowly dying", a concept which always eluded me. I mean, come on...if you're posting a profit, who cares if you're growing by 5% or 10% or whatever; you're still making a profit.

Re:So, the system works?

[Anonymous Brave Guy]

I recently bought a book as a Christmas gift for one of my family. It's a best-seller in hardback, and it cost me nearly twice as much in my local bookstore as it would have cost me from Amazon.

On the other hand, it is in pristine condition (unlike the last books I ordered from Amazon, which were significantly damaged due to careless packaging) and it is here (unlike my order full of Christmas DVDs from Amazon, which is now five days overdue, and my other half's similar order, which is now more than a week late).

The trouble is, if most people start checking books out in the bricks and mortar stores but then buying on-line, the kind of crappy service I have received from Amazon lately will be the only option, while the reliable and helpful service provided by my local book store will go the way of the dodo because offering those benefits to potential customers does not directly generate profit. I'm not sure what the answer is, but a pure-capitalism, only-the-price-matters approach certainly isn't it.

Re:So, the system works?

[tophermeyer]

I did this recently with a TV at Best Buy. The sale price on the one I wanted was close enough to what I could find online.

I was able to actually see the TV, see how it looked, and spin the thing around to look at how the I/O ports are configured. I probably paid a little bit more than I would have online, but I firmly believe that the little extra cost is worth it to keep actual displays available at brick-and-mortar mortar locations.

Definitely did not by the extra high quality "HD Optimized" gold plated monster cables though. I might be a little altruistic, but I'm not a fool.

Re:So, the system works?

[Lord Byron II]

All the cell phones are doing is adding to the efficiency of the market. And most economists would agree that this is a good thing. Retailers that profit by inefficiencies in the market are doomed to failure eventually, at least if you believe in free market principles.

One advantage that retailers will have for the foreseeable future is in letting the customer experience the product prior to sale. That's a big reason why the Apple company stores are such a good idea. And the reason why Target recently re-did their video game section to allow the customer to hold the game prior to purchase, instead of looking at it behind glass, as was the case before.

Retailers do have a major disadvantage with regard to sales tax. In Chicago, the sales tax rate is currently 10.25%, which means that a $999 TV has over $100 tax applied. This more than negates the cost of shipping by buying online. If I was a Best Buy or a Walmart, I would be arguing for an Oregon-like tax structure, with no sales tax.

Re:So, the system works?

[Charcharodon]

Let me run right down and pick something up from my local bookstore.....oh wait there isn't a local book store because I'm military deployed in the middle of nowhere.

Even back home going to the bookstore means driving half way across town.. I consider the traffic part of the "crappy" experience of buying local along with the lack of selection, the line I have to stand in to by the book, and the musac I have to listen to.

It's a dead argument anyway, I've bought a Kindle and I'm hooked. So the local bookstore as well as the Amazon hard copy book section is pretty much dead to me. In the past two months I've "purchased" and read nearly 70 books. Prices ranging from zero all the way up to about $10 and had them delivered within minutes.

The only downside so far has been the destruction of my first Kindle in my backpack. (The corner of a table caught it square in the middle of the screen.) The second one was bought along with a cover and a armored storage box.

Re:So, the system works?

[GooberToo]

You're the exception, rather than the rule.

For most consumers, they would rather buy a label, regardless of quality or price.

Many people find it hard to believe, but for the majority of Americans, purchasing a car is an impulse purchase. Accordingly, most Americans purchase a vehicle because of envy status (label).

As an example, let's look at Corvettes and Harleys. On the world stage, the Corvette is generally considered a crap, plastic car. It sells well in the US because of its American heritage and perceived prestige. The reality is, a much, much better car can be had for the money.

Likewise, look at Harleys. They consistently have extremely poor reliability ratings; especially when compared against the biggest six motorcycle competitors on the world stage. Yet Harleys not only sell very well, but frequently demand a premium price.

Both of the above examples are good indicators of how willing the American public is to pay a premium for an inferior product. So ultimately, regardless of actual quality, its all about label perception.

Re:So, the system works?

[bluefoxlucid]

I've been wanting to start a competitor to Wal-Mart but you know, no capital. It'd be like Wal-Mart but more selective...

Wal-Mart sells some good stuff, but mostly crappy stuff; but for the most part all they do is play on price. I can get King Arthur Flour for about $3.50 for a 5lb bag there, which is a great price for the best flour I've yet found; although the bags look a little manhandled, and I wonder if they really have 5lb or if some's been beaten out of them in transit.... Wal-Mart pushes its manufacturers to reduce prices at any cost, suggesting ways to cut corners, get cheaper materials, even outsource to China; I dislike this, because they care nothing for quality.

What I want is a Wal-Mart like store that specifically tries to play the budget game, but on value terms. "Cheap as shit" is not value; "Great Value" brand food is the least costly food, but also the worst value. If you want value, you must spend a little more.. and only a little more.

When I buy clothes, I go to Sears. I pick out Land's End Business Outfitter's clothes. A shirt at Wal-Mart costs $18 and tears at the seams or develops fuzzy spots or holes after 2-3 washes; after 2 years, the $25 Land's End shirts I have aren't even discolored, much less fuzzy or tearing. One DID fall apart, a little... one of the seams wasn't finished right. I have had 8 of their shirts, that one was an oddity. I suspect performance of Polo and Doc Martin's clothes would be the same; Levis always made awesome jeans. By the way, pants at Wal-Mart cost about $22 last I looked, and Land's End pants cost $40 BUT I buy them on sale for $30, which happens all the time.

That's the kind of thing I would do for a Wal-Mart clone. We can't compete on price with Wal-Mart, but you aren't getting Wal-Mart crap. I'd skip the standard stuff. In the food section I'd only offer King Arthur and maybe some of the fine-milled flour I can get at the farmer's market in bulk (I'd talk to the farmers for this one). There's way better milk than the mass-market pushed crap; Trickling Springs Creamery makes EXCELLENT milk (it surprised me milk actually could taste better), and there are other dairies that put out cheaper but still better product than Leigh's and Cloverfield. Fresh baked bread is always good; there would be a bakery ... like at Safeway, you know, $1 baguettes and artisan loaves, bread is pretty cheap to make and can be done en masse for not too much labor cost (that $1 baguette is 25 cents of product and 75 cents of labor and margin).

Good food, better quality non-designer-brand clothing (not like $100 shirts, more like $25 shirts instead of $18 shirts), maybe stock some alternative stuff in the personal care section (Merkur DE razors, straight razors, brushes, DE blades; Dr Bronner's soap, etc, there's some not-Dial-soap that's not $4 a bar too; some higher end colognes that only cost $10-$15 a bottle...). I might tint the CD section... no censoring CDs, but aim for less mainstream material and more diversification (i.e. have Die Toten Hosen in the metal section, some Eurobands, some less-known names like Sonata Arctica, indie stuff and good mainstream), maybe with a suggestion box so customers can share their favorite no-name bands. CDs are easily accessible (Amazon), I'm not interested in pushing mainstream crap; the value-add service there is to have an "interesting" CD section, not a grocery section to buy radio songs and Top 10 hits.

I think it's a sad reflection of society that we have places like Wal-Mart that push "low low LOW prices" and sell absolute garbage. Everything there is either "what everyone buys" or "something we dug out of the trash" ... it's like a dollar store that's trying not to be a dollar store. They know they have to sell actual Oxyclean because the brand recognition is better than the $1 price tag on "Awesome Oxygen", same goes for dish washing liquid and motor oil (motor oil is actually important though). Gillette razors are so over-markete

Re:So, the system works?

[rjstanford]

I'll be happy with better food and nicer atmosphere. I don't expect the sit-down Italian place down the road to be price competitive with McDonalds. I expect to get great food, really good service, and a more enjoyable experience.

One thing that has happened that a lot of people don't like to talk about is that a lot of sub-par small businesses have also shut down. If the sit-down Mexican joint was the only place in town and everyone was used to it, then a Chipotle moved in next door and offered food that was 95% as good for 40% the price, you'd expect the more expensive one to suffer. In many small towns businesses have stepped up their game to actually offer those things that makes them stand out - better service, better focussed selection, etc. In others, people realized that what they thought had been good pricing/selection/service actually wasn't.

Of course, many fine businesses have been hurt as well because people will accept 50% of the quality for 90% of the cost. But that's not the whole story.

Re:So, the system works?

[Eponymous Coward]

I'm not sure what the answer is, but a pure-capitalism, only-the-price-matters approach certainly isn't it.

Capitalism is about the best value, not price. For you, that means shopping at a local B&M. Like the last sentence of the summary says, retailers need to provide a better experience to prosper.

Re:So, the system works?

[Pojut]

True, but I'm referring more to large businesses. If a company makes $100 million in profit one year, and $150 million in profit the next year, but they were expected to make $175 million in profit, the market completely disregards the fact that they grew and their stock dives.

Why? Because they didn't hit some arbitrary expectation of growth? Because they were greedy, but not greedy enough? That's what I was referring to.

Re:So, the system works?

[__aamnbm3774]

And you have somewhere to return it. And someone to complain to directly.

The premium you pay is more like a warranty of sorts. Someone/something is more accountable than an invisible mega-corp who mysteriously ships things to you.

Have you ever had an Amazon shipment not show up? It's horrendous trying to get your money back (or a new set of items). Amazon blames UPS, UPS blames Amazon. It sucks hard. It takes weeks beyond what you wanted to wait.

Re:So, the system works?

[Anonymous Brave Guy]

The trouble is, nothing stops the phone-wielding shopper from enjoying any better experience that might be offered by a local book store, but still giving their money entirely to the cheap on-line supplier anyway.

Re:So, the system works?

[eison]

The chains don't have a good supply either. You can find book #4 and #7 in a popular series, and anything else they will be happy to special order for you. But if I'm going to be ordering and waiting for things, why shouldn't I just do it myself online and save some money and avoid having to drive back to the store?

Re:So, the system works?

[kenrblan]

You just hit on one of my fundamental disagreements with how the US economy now operates. Originally, when companies opened their stock for public purchase, the idea was to get a cash infusion to accomplish some objective (expansion, r&d, and so on). Those stock holders often received a dividend on that purchase. For instance they might have purchased stock at $10 per share, receiving a quarterly dividend of say $0.25. This essentially meant the investor often saw an immediate return on the investment when the company was profitable. In this case, a 10% return annually. This encouraged long term holding of the stock and a more stable stock price that didn't require dramatic 10% growth per year. If the stock holder held the example stock for 10 years before selling, the sale would be pure profit regardless of the stock price at the time of the sale. The problem is that a 100% publicly owned corporation gets very little benefit from the stock market once all of its shares have been bought up since the sales of its shares don't infuse new revenue into the company since those stock exchanges happen solely between 3rd parties.

Now stocks are bought and sold primarily for short term gains since most stocks don't produce dividends. The only motive there is the price of the share, which dictates that the company has to show profit growth. When a company makes a 3% growth in profit instead of 5%, the share price usually takes a significant hit, which is very illogical considering the company has actually improved its value per share. Wall Street now operates on totally unrealistic expectations of infinite 5-10% annual growth which is obviously unsustainable in the long term. This seems painfully obvious to me, but I never hear financial analysts discuss it on "news" shows.

Re:So, the system works?

[99BottlesOfBeerInMyF]

In the city to which I'm currently residing...

See, here's the thing... you live in a city. Walmart primarily targets rural towns and works hard to drive every other business into the ground so that they can have a near monopoly on retail sales in that location. Sure, sometimes competitors come in like Meijers or Kroger, but usually only once a town reaches a certain size, large enough to be profitable for them. In many cases only Walmart's huge volume and cutthroat supplier practices make what they do profitable over long period of time. So in that regard, the system is failing the citizenry in small towns.

I also think if people knew and understood Walmart's practices and how they effect American manufacturing, people would be outraged and demand those practices be banned. Given our current educational and political strife, however, that's not ever going to happen. There is some hope though as many small manufacturers have become savvy enough to realize doing business with Walmart may look like a good idea and will net them large short term profits, but it will also kill them within a decade. Numerous books and articles about how it works have made their way around to most every business school and publication so informed businessmen know how to avoid it. The only issue remaining is that unscrupulous businessmen will take the deal, cash out when profits go up, and walk away before the company dies.

Re:So, the system works?

[radtea]

I was able to actually see the TV, see how it looked, and spin the thing around to look at how the I/O ports are configured.

Having just helped my g/f buy a netbook at Best Buy, I'd highly recommend you do the same thing to the TV they actually sold you, which may not be the one on the shelf.

Seriously: the clowns at Best Buy tried to sell us the wrong netbook with the wrong battery at the wrong price. That was AFTER I had opened the box to check things and noticed a 25 Whr battery that was supposed to last six hours, spoke to the sales-person about it, who spoke to the "Geek Squad" clown about it, who assured me that advances in battery tech and power management made it totally plausible that it was the right battery.

When I realized the price was wrong on the bill I got the sales clown to bug the manager who tried to blow me off. I then pointed out the model number on the bill was different from the one on the self and the manager claimed the last four digits were only for colour. I leaned on them (politely) and got them to look up the model number online, and lo and behold it was rather more than the colour that varied with those crucial last digits.

So a computer-literate, physically imposing man who has been described as 'forceful' in performance reviews was just barely able to get the correct product out of Best Buy. I can only imagine what the average person goes home with.

The best thing: after all this my g/f decided to buy a carry-bag for the netbook, and they charged her the wrong price for it (she went back the next day and got it reduced to the posted price, and they immediately pulled the posted price off the stand...)

I've had pretty terrible experiences with TigerDirect, who have great prices but really annoying follow-up (endless calls from salespeople). But I'd gladly buy from them if it meant never having to set foot in Best Buy again.

Re:So, the system works?

[Chaos Incarnate]

Borders, at least, is willing to have items shipped to your home for free if they weren't in stock at the store.

Re:So, the system works?

[wwfarch]

I think you really missed the point of the post and focused on the literal translation of the words posted. I think Pojut meant that a business can be posting a significant profit without growth and still be fine. If you're running a one-man business with a profit of $500,000 but no longer growing I think that's fairly successful. If you want to grow the business to be larger then go ahead but that doesn't mean the business is slowly dying.

Re:So, the system works?

[ottothecow]

I don't know if you have amazon prime down under...but we do up in the US (free 2-day shipping on everything...in my area orders almost always arrive next day if you order before 2-3PM).

At that point...I could really see the advantage of going to try an item on in a store, seeing which size fits, scanning the barcode into amazon and having it show up in my office the next day (its not like I was going to wear it out of the store 99 times out of 100).

This is abusive of the retailers since I would expect that some of the markup is paying for the fact that they have a retail storefront where I can see/touch/try the goods without having to worry about return shipping--how long until a store tries charging for entry to the changing rooms?

Re:So, the system works?

[mark72005]

Harleys have a market that is entirely separate from the rest of the motorcycle market. There are generally no reasons to explain why someone who bought a Harley did so. They just do it because they think HD is "the real thing". It's hilarious to hear a group of them talk about how they much they spent on a big, slow, unreliable bike. The purchases all rest on "the tradition", "the feel", "the prestige", etc... nothing with any basis in reality.

Now, you'll hear them retort today about how reliability is much better than it used to be, and it has gotten better, but it's still nowhere near that of basically any other brand. They are intentionally using an antiquated engine design with 1950s tech and marketing like anything more advanced "ain't shit". I mean, they are still air cooled for goodness sake...

HD is the greatest case of drone marketing in world history. They have a militant user base willing to pay a premium price for a product that is inferior in every quantifiable way. Not only this, but they spend trillions on cheap chinese trinkets just because they carry the logo.

It's not like the premium clothing outlets where the product is better, but not in proportion to the price. It's even greater than that.

Re:So, the system works?

[radish]

Amazon, Newegg, ZipZoomFly. There's no reason to ever look anywhere else IMHO. Excellent service and prices from all three. TigerDirect and Buy.com are on the avoid list.

Re:So, the system works?

[DerekLyons]

I'm not saying we should regulate the hell out of everything but I really miss having other options when I shop.

In the city to which I'm currently residing in Kentucky (you know, south of the Mason-Dixon, where all of those gun-toting conservatives people love to make fun of so much) there is a Walmart, at least 2 Meijers, several Kroger's, a bunch of specialty ethnic stores, a whole foods type co-op, along with both chain electronics stores and several specialty shops all over the place. "Other options" are doing just fine.

Not really. What you have is the illusion of other options - as the other chains have long since adopted Walmart's predatory pricing and shoddy merchandise.

Re:So, the system works?

[rjstanford]

Hmm. Perhaps you could call it Target?

Re:So, the system works?

[bluefoxlucid]

it's because most buyers only buy cheap products at low prices and don't see any reason to trade up, that's a problem with manufacturer branding or value propositions though.

I pay $20 for 3 pairs of socks and I have lost a few and had to buy more... after 2 years. The old ones are slightly yellowed, but otherwise identical to the brand new ones.

After 2 months, Wal-Mart $6 for 8 pair socks all have holes in them and I need to spend another $6 for 8 pair, or wear something that's falling apart and pounded flat but wasn't really fluffy and luxurious to begin with anyway... you know when they show poor people on TV and cartoons and they're wearing falling apart shoes and their socks have holes in them? That's what a Wal-Mart sock looks like after 2 months.

If I don't lose the shit, $20 for 3 pair is actually a good deal. But this took a $20 investment on 3 pair of socks to find out, which is not attractive to a lot of people-- as you said, value proposition, socks are cheap. It's the same with cotton undershirts (the $20 for 3 white undershirts I get are not itchy; fruit of the loom undershirts itch like fuck, they're almost papery).

The secret to success here is the razor and blade model, really, but without the razor. People won't switch from a Mach 3 with $20 8 packs of blades to a Merkur that you spend $35 for 100 blades for. The Merkur HD long handle is a $40 razor; you need a $20 brush for it and then pucks of shave soap that cost $5-$10 each and last several months (my $10 puck of Tabac lasted almost a year). The initial investment of $60-$80 is too much for most people when they can get a Mach 3 for $10 and then spend $20 a month on blades forever. Similarly, people will spend $18 on shirts that they have to throw away after 6 months-- sure you can wear the tattered, worn crap... unless you have a bizcas dresscode office job. And bizcas office people shop at walmart too--some of them make $20k/year, some make $60k/year, even at $100k/year they might not see the point in "wasting money."

I'll never understand how people can make $100k/year and still buy $60 tires, though. And cheap, crap-quality food when you can get so much better without spending $300/meal.

Re:So, the system works?

[Maxo-Texas]

When i was a child, books were 2.00 and 2.25. Gasoline was 88 cents. Electricity was 6 cents a kilowatt hour.

On that baseline with inflation, books should be about four to six dollars. They are eight dollars and some authors like Rowling are billionaires.

Books have gone up faster than inflation for successful series. They are currently overcompensated (a successful author shouldn't be a billionaire if we have an efficient market).

Since there is a glut of entertainment, I've mitigated this by starting with the less expensive entertainment first and working my way up. Something like Potter, I wait a couple months and borrow a friends copy, check it out of the library, or buy a used copy. In many cases, I just do without. If there are 10 excellent series to read and I only have *time* to read 5 of them, then I can easily cut the 5 most expensive.

The entertainment glut is only getting worse. Sometimes when I talk to 30 and 40 year olds, there are movies and books I consider staples that they haven't gotten too yet.

As soon as you back a mere 90 days off the leading edge, your costs drop by 50%.

Re:So, the system works?

[Lilith's Heart-shape]

And all of that is why I ride a Triumph. Fuck Harley-Davidson.

Re:So, the system works?

[99BottlesOfBeerInMyF]

Anecdotes are great and all, but we're supposed to be nerds. Here are some studies:

http://www.newrules.org/retail/key-studies-walmart-and-bigbox-retail#4

Interesting findings from these studies show that most retail purchases at a Walmart (85%) have corresponding losses from local business, within two years there is significant loss of local businesses in general when a Walmart opens, Tax revenues generally do not go up, Retail employee wages and benefits drop as the result of a Walmart opening. Walmarts funnel nearly twice as much of the money running through them out of the local economy (out of the state) as local retail businesses do. One study found that for every job created by a particular Walmart studied, the local community lost 1.4 jobs as local businesses closed. Counties with one or more Walmart have higher poverty rates and poverty rates that increase faster than other counties in the same state and/or area, over a 10 year period.

Re:So, the system works?

[yurtinus]

That's sort of the genius of it... Everybody has this image of HD as a badass motorcycle company when really it's a marketing company (like Nike, Hollister, etc, etc). They sell an image, motorcycles are just a conduit for the higher-margin apparel. How many people do you see wandering in HD apparel that don't ride any bikes? How many places sell the HD logo that don't have anything to do with the bikes? There's definitely some talent somewhere to make that much money without a lot of effort. I'm just jealous that I didn't think of it first ;)

Re:So, the system works?

[Nethemas the Great]

Capitalism is about generating the highest revenue at the lowest cost. It has absolutely jack sh*t to do with "best value." The notion of value in a capitalist society is a delusive manufacture of the the marketing department designed to part customers and their money while providing little if anything of true worth in return. The penultimate expression of this can be seen in patent holding corporations such as Intellectual Ventures whom extract money from you for a promise not to sue you.

Re:So, the system works?

[balbus000]

I was planning on posting this while reading the GP's comment.

My relatives jokingly pronounce it Tar-jay, (frech-like) to make it sound more chic.

Re:So, the system works?

[BigSes]

Just because a store says it always has the low price in its advertisement, it doesn't make it true.

I believe the slogan is actually "Always Low Prices" and if you ask me, that's very non-commital. Probably for that exact reason, so nobody can attempt to legally to hold them to having the lowest price.

Great!

[The MAZZTer]

The retailer's advantage has been eroded

Fine by me.

This is going to accelerate the demise of retailers who do not have either competitive pricing or a standout store experience.

Good riddance.

Re:Great!

[Anonymous Coward]

The retailer's advantage has been eroded

Fine by me.

This is going to accelerate the demise of retailers who do not have either competitive pricing or a standout store experience.

Good riddance.

You do understand that small stores cannot possibly compete on price with the likes of Walmart et al, right? It's not a question of greed or a lack of will, it's simple economics. In a world where only the lowest price store could exist you would only have a couple of companies in that sector, period.

And we all know what happens when there is a lack of competition...

Re:Great!

[jorenko]

And that's where A Standout Store Experience comes in, if you're only willing to stick it out and read the last quarter of the sentence. Small stores need to have helpful, knowledgeable staff and excellent customer service; enough so to engender extreme customer loyalty.

Re:Great!

[Charcharodon]

But you act as if no one else can open a store again once they are all gone.

A true monopoly is one where no one else is even allowed into the market, such as our crapy phone, cable, and power systems, which are backed by the force of law, or in situations where the last one standing can prevent anyone else from competing.

That is not the case in retail.

If Walmart manages to wipe out everyone else and then starts jacking up the prices, competitors will start springing up all over the place with time forcing them to either become the price leader once again or be wiped out themselves.

Re:Great!

[rjstanford]

But you act as if no one else can open a store again once they are all gone.

A true monopoly is one where no one else is even allowed into the market, such as our crapy phone, cable, and power systems, which are backed by the force of law, or in situations where the last one standing can prevent anyone else from competing.

That is not the case in retail.

If Walmart manages to wipe out everyone else and then starts jacking up the prices, competitors will start springing up all over the place with time forcing them to either become the price leader once again or be wiped out themselves.

Heh. If we all opened stores at the same time, maybe. But if you're going up against Walmart, a multi-national, in the environment that the GP post described, you'd better have deep pockets. If not, they can drop their prices down below cost (actually probably to above their cost but below yours) until you go out of business. Hell, they could just give stuff away until you ran out of money, and make it all up as soon as you closed the doors. The long periods without competition would make up for the short periods of unprofitability.

Frequently, selling lots of stuff below cost is illegal for just those reasons. That discounts the fact that Walmarts wholesale pricing is so much better than yours would be that they wouldn't have to. Its like poker - someone with deep pockets can just outlast the competition, especially if you're not allowed to go all in but they're allowed to keep raising the stakes.

In completely unrelated news

[elrous0]

Retailers soon to petition FCC to allow cell-blocking technology in private businesses.

Re:In completely unrelated news

[mrsteveman1]

That would never be permitted in public stores, people would stop shopping in them or stop buying as much and rush out of the store sooner, destroying whatever advantage the store gets for erecting a "wall of ignorance".

What if there's a family emergency? What if your kid got hurt at school? You simply can't screw with mobile connectivity anymore, it's too important.

Re:In completely unrelated news

[Neil Boekend]

I would see such an action as a clear indication that they wish to screw me over with expensive products. I wouldn't buy anything there.

I did this

[fridaynightsmoke]

I used my phone to find the best prices when I was buying various white goods (fridge/freezer, washing machine, dishwasher) upon moving house, from a certain UK big-box electrical retailer.

Of course, the salesperson said "Oh no, we can't match internet prices" but it turns out that given a choice between a discounted sale and no sale, they can

Protip: You haven't got the best price until the salesperson has sheepishly had to ask the manager for authority twice.

Re:I did this

[skgrey]

I used my iPhone and the Red Laser app to scan all the toys my kids wanted. It shows all the prices for the stores around me, as well as online. I got approached by at least one sales person asking me what I was doing, and Toys R Us specifically was not happy. I got approached by a floor manager after the sales person approached me, and he asked to see the app. He looked none too happy. Why in the world would I not check if I had the ability??

Re:I did this

[DigiShaman]

I'm willing to bet that while one product is cheaper at one store, another may be more expensive. It could be a washout when it's all said and done shopping. If I was a sales manager, I would be offering some incentive to my customers to do all their shopping at my store at once. The more they spend, the greater their savings. I'm willing to bet it would keep people from playing the numbers game with you, and who want's to bounce around stores just to save a few bucks on a toy anyways?

Re:I did this

[DavidTC]

If I was a sales manager, I would be offering some incentive to my customers to do all their shopping at my store at once. The more they spend, the greater their savings.

See, that's what's gone away: Any reason for customers to have store loyalty.

It used to be that you could actually get discounts. Nowadays, they can offer discounts for exactly one reason: price matching.

Sure, there are those customer loyalty cards, but the free ones are clearly just privacy-invading discounts that should already exist. You're not given a discount for being a 'good customers'.

The ones you have to buy, like bookstore ones, are a manual discount, which is just as idiotic. Those things should be offered free after someone's bought $30 or whatever. Or, even better, offered free, but with no discount, and as you buy stuff using them the discount gets larger and larger.

The only place you get actual discounts for actually buying stuff are those places that punch the goofy cards, which appear to somehow be the lowest rung of discounting. (And airlines have some sort of frequent flying thing too, which I don't know much about. Normally people when talking about 'frequent flyer' inexplicably mean 'stuff out credit card company gave us', but I'm sure there's some actual rewards from flying a lot.)

Other than that, no one offers any sort of discount, which is ironic, because they have more ability to track you than ever, and hence could easily offer customers discounts. They don't even need cards. At checkout: 'I see you've purchased more than $80 this month. If you total more than $100 by the 31st, you get $10 off, so next time you're here, you can get $20 and only pay $10.'

You're doing it backwards, you idiotic resellers. Stop invading privacy against the customer's wishes. Just offer them an actual discount for loyalty, and actual discount based on them being good customers, not a pretend one by marking up prices and then pretending to 'discount' them because someone filled out a stupid card, which people see straight through and, um, doesn't encourage any loyalty. At that point, people will start making sure that you know how much they've bought there. You set something like that up, and forget needing the customer cards...people will deliberately link their credit cards if they're using multiple ones, and tell you their actual name and address. (Not the 80% fake address the 'customer loyalty' cards have.)

And that's just the 'general discount'. It used to be that if you bought a X, you could get X accessories for cheaper at the time, which encouraged people to buy all their stuff at once. Now half the time X is a loss leader and the accessories are marked up 300%. (I'm looking at you, Best Buy.) This is insane.

The only store that gets any sort of store loyalty from me is Barnes and Noble, because I'm afraid if I don't, actual physical bookstores will cease to exist. B&N has it sorta right, in that they keep mailing me coupons (Which I actually do use.), but it seems they're just mailing them because I'm a member, and not because I've bought things per se.

Until companies start actually rewarding actual purchasing and actual loyalty, there is absolutely no reason for customers to be loyal.

Re:I did this

[rjstanford]

I used my iPhone and the Red Laser app to scan all the toys my kids wanted. It shows all the prices for the stores around me, as well as online. I got approached by at least one sales person asking me what I was doing, and Toys R Us specifically was not happy. I got approached by a floor manager after the sales person approached me, and he asked to see the app. He looked none too happy. Why in the world would I not check if I had the ability??

Can you at least understand why he wasn't happy? If you want to use his floor space, play with his display models, and take advantage of all the other "free" services a bricks and mortar store provides, you should make your purchases there as well. Otherwise, do your research online and buy wherever is cheapest - that's fine too. Its just common decency.

Re:I did this

[raodin]

Look, people shop around, they did before the internet, and they did before mobile phones. There is nothing any retailer can do to stop this.

Being grumpy at a customer for using the tools at their disposal to shop around more efficiently is simply driving that customer away. Treating your customer with respect, on the other hand, *might* make you a sale even if your prices aren't the absolute lowest.

A sales person calling over a supervisor to bother a guest in their store for price shopping is extremely disrespectful. You call over a manager for suspicious activities, or clear violations of posted store polices (non-service pets, inappropriate clothing) NOT because you are worried the customer might find out you don't have the lowest price and go shop elsewhere. They might have passed on a product at your store due to price, but now they almost certainly will because you harassed them. How is that a win for your store?

Uniqueness

[truthsearch]

Most stores sell the same things that are found everywhere. The most profitable stores are often specialty, where there's little option to find a product elsewhere. In the long run we might see more manufacturer stores, bypassing the generic middlemen. E.g., Apple.

Re:Uniqueness

[minorproblem]

Exactly, i wanted a very specific amplifier and speakers just the other day and had no option but to order them through the official distributor because no one else sells them.

+1 Rationality

[TaoPhoenix]

Awww. Store can't bamboozle poor customers with flashy displays anymore?

Books

[Anonymous Coward]

If I walk into a store and something is $30 and it's $27 online. I'll probably just buy it right there.

But the other day I went to get a book from Borders and it was $30 in the store and $15 online. For that I'll just buy it when I get home.

At Barnes & Noble the in store price for something like Rosetta Stone is $600, but it's $450 online.

(I think everything is just 20 to 30% more expensive in the store.. regardless of size/weight/etc.

Re:Books

[MyLongNickName]

This reminds me of the results of a survey. People were asked "If you found out that this $100 piece of software were only $50 across town, would you leave this store, drive across town and buy it cheaper?" The answer was almost always less. Others were asked "If you found out that this $1,000 computer were available for $950 across town, would you leave this store and by it cheaper?" Fewer than half said yes.

So why is the value of our time less for more expensive products? It seems people are fundamentally illogical. Yes, I know... I must be new here.

Re:Books

[mdarksbane]

People working with large numbers deal in percentages and proportions. It's how our monkey brains try to handle values that are so much larger than anything we were designed for.

There's also the question of worth. Something that is only worth $50 might not be worth a purchase of $100, but something that is worth $950 most likely is probably still worth $1000 to someone.

This is, of course, why the most efficient use of your time for most people is in negotiating a better deal on your car or your house.

Re:Books

[MyLongNickName]

It is a perfectly fair comparison. In fact, this info comes from a marketing class and is used as an example of how you can use psychological games to get folks to pay more. No... this wasn't the exact term used in the class... terms like "price discrimination and segmentation" are used.

But the bottom line, the rationale you are citing is used by retailers to extract more money out of you than you logically should.

Re:Books

[MyLongNickName]

You are 100% spot on. Going through a marketing class you see folks have spent years studying these psychological facets and know how to take advantage of them. As humans, we are not 100% rational, present company included.

I tend to be more rational and less materialistic than most (more of my money goes to schooling and charity than I spend on everything else combined) yet I see myself fall into some of these traps.

So while I never intend to be in marketing, it is good to know how the enemy thinks :)

Re:Books

[natehoy]

It's not supposed to be a fair comparison, it's supposed to be a good example of how our brains work, and it is. This isn't about how much money you have, it's about how much you are about to spend on something.

In each case, you're saving $50 and are assumed to be putting in about the same effort. To save the same $50, people will go to the effort of driving across town in descending order of likelihood:

1. Receive $50 in cash or a gift card without buying anything at the moment.
2. Receive a free item worth $50.
3. Receive $50 off a $100 item that they intended to buy.
4. Receive $50 off a $500 item that they intended to buy.
5. Receive $50 off a $5,000 item that they intended to buy.

All other constants, like how much money you have in your bank account, are the same. Even the poorest person, after saving for a year to buy a $15,000 item, will generally drop a week's grocery money in additional cost to save a drive across town, when they'd happily drive across town for a free week's supply of groceries.

In all cases, it's the same amount of money they are saving by performing the same effort. $50 for driving across town. It's just a beautiful quirk of our monkey brains that $50 has a variable value depending on how much you were intending to spend at that moment. A quirk that companies are very good at using to their advantage.

And Nothing of Value was Lost

[rwv]

Stores can no longer use tricks to get me to spend my money there, and I'm okay with that.

I actually bought an iPod case at Best Buy the other day for $11 knowing it was available on Amazon for $7. The brick-and-mortar shopping experience is still worth it if I want something now or doing what to worry about paying for shipping (usually I buy *more* than I need at Amazon for small purchases to qualify for free shipping).

At the end of the day, the customer wins. The best stores win. And crappy stores lose. This is a good thing.

Self Price Match

[Cemu]

I recently shopped at both Best Buy and Sears and discovered that their online store sale prices were $80 and $70 cheaper than what their brick and mortar store could offer. I showed a sales member their store's site on my phone but it turns out that they can't match their own prices. I do, however, like both stores' website's option to buy now and pickup in the store. Yep, I bought the item online while in the store and just walked over to customer service and picked it up 10 minutes later.

Re:Self Price Match

[AndrewNeo]

Maybe you should have tried a little harder. Best Buy is supposed to match their website prices. There was a huge ordeal a while back on how their in-store computers were showing different prices on their own website so they didn't have to match the lower price on the internet facing one.

Total price and instant Gratification

[Yvan256]

Yes it may be cheaper online, but don't forget to add the shipping cost. Not all places offer free shipping and sometimes there's a minimum amount to spend to get the free shipping, etc. Don't forget cross-border delays and charges or you'll be shockingly sorry. Especially those brokerage fees, which often are more than the shipping cost added with the customs fees.

But where the physical retail stores still have the advantage is in how fast you're getting what you want, if they have it in stock.

With these two things in mind, the only difference is that you can compare prices with other nearby physical stores without actually having to drive there to check the prices. The real competition is still the other stores, nothing really changed if you want something "right now".

Re:Total price and instant Gratification

[Yvan256]

I'm guessing you never ordered anything outside of the USA.

For us Canadian, ordering from the USA usually results in our order being hold by customs, delayed for a day or two, then having UPS charge us brokerage fees of 35$ on top of customs fees of 10$ and UPS own 25$ shipping cost.

Re:Total price and instant Gratification

[rjstanford]

I'm a prime customer too - got to say, I'm a big fan. Just got a mattress (a mattress!) delivered. Two days, no charge. Sheesh...

Re:Total price and instant Gratification

[amaiman]

Be careful with larger items...I've noticed that Amazon often has a much higher price on certain heavy/difficult to ship things like furniture when they're "Prime Eligible". It's sometimes cheaper to buy it elsewhere (even with a shipping charge) than to get the "free" shipping that's actually built-in to the higher price. For normal stuff (books, electronics, media, etc.), Prime is great.

"To improve your shopping experience,

[Thyrsus]

this store is now a cell-phone free environment."

There. If I predict it, it will be less likely. ;-)

Re:"To improve your shopping experience,

[MobileTatsu-NJG]

this store is now a cell-phone free environment."

There. If I predict it, it will be less likely. ;-)

This is exactly why you don't want places like theaters implementing phone jamming devices. Once it becomes 'acceptable', doing it at a place like Best Buy gets lots easier.

Re:"To improve your shopping experience,

[blair1q]

Cool. I'll just leave the cell-phone outside. Along with the pocket it's in, and the ass those pants are on.

What they are really saying...

[JavaBear]

"We are afraid now that customers can figure out we are cheating them with false advertising, before we manage to snatch their money."

Devil's advocate

[Arancaytar]

It's a good thing to give the customers more transparency in who they do business with, but I am concerned that this will reduce competition even further to price warfare. Quality, safety, environmental sustainability and the welfare of employees may take even more of a backseat than it already does.

Needless to say, this transparency is not the root cause or a bad thing. However, with shoppers caring more about price than anything else, it is vital to regulate industry and retail to ensure that companies do not rape their people and the environment to stay competitive.

Re:Relative Savings

[TaoPhoenix]

I'll chip in the the "rationality of the decision". Someone deciding whether to change their habits on $50 vs $100 is indicating they are concerned with the overall effect of the purchase on their budget. Someone making a capital investment of $1000 for a computer shouldn't be worrying about where their next necessity purchase is coming from. It's like the famous joke "I'll take 2 Angus Bacon Cheeseburger meals, supersized, but make the drinks diet coke because I'm on a diet".

Black Friday Markups

[OzPeter]

Some stores seem to think that the customers are downright stupid. I have seen this before personally (but not recently): Last Black Friday a friend reported that the sale price on some stuff had gone *up* during the sale.

It's a balance.

[tedhiltonhead]

I have, on a couple occasions, used my smartphone to price-compare when in a retail store. Both times were at local, non-chain businesses. I like to visit a small shop when possible, because usually the owner or manager is present.

On both occasions, I very politely explained "Hi, I like this item and am hoping to buy it here. I was able to use my smartphone to compare prices. Some retailers will price-match Amazon (etc), who has this for $X. I can show you if you like. Would you be willing to match that price please?"

Now, here's the thing. I get that small businesses don't get the same wholesale pricing as Amazon. I'm not really demanding an Amazon price match. If they weren't willing to budge at all (especially if it's more than a 10% difference), it's possible I would walk. But, even if they met me halfway, I would still be happy to do business with them.

I think the idea of always paying the "asking price" is a very American cultural phenomenon. In Turkey, for example, it is literally expected that a customer will haggle for at least a 10% discount. It never hurts to ask, politely!

Online does not offer everything

[dazedNconfuzed]

You can't find everything online, or discern it from all the other unwanted crap that shows up in a search for a popular high-turnover product category.

Try finding a particular Sony camcorder battery online. All too often you'll get flooded with wrong models, crappy knockoffs, and otherwise have difficulty finding what you want. Easier to walk into a big-box store and pay a bit more - you can confirm its not a POS cheat, and can return it pronto if it is.

A smart retailer will recognize what customers want, want now, and will have trouble locating online. Yes, the nature of brick-and-mortar must change ... for the better.

Shops - Showrooms

[Confuse Ed]

Are we part way through a transition from shops being where you both browse / research products and purchase them, to separating these two phases of the shopping process.

The way I see it there is still a need for bricks & morter 'showrooms' where you can go and compare products side-by-side or even try them out in real life : e.g when buying a netbook / laptop, I always go to the local PC world or similar to try out the different keyboards and see how the displays look.

However to make the purchase, it is clearly more efficient and therefore cheaper to sell through either giant mail-order only warehouses (e.g. order from amazon, or order direct from the manufacturer) or something like Argos for when you want to be able to collect it yourself same-day.

The problem is how the showrooms get payed for? will we move instead to individual manfactures paying for showpiece storefronts (maybe Apple stores already are this? do they expect to make a profit on on-store sales, or are they just giant adverts driving their sales through other channels?)

The current middle-ground that retailers seem to be using is the online 'reserve and collect' - but they still tend to be keeping the much of their stock on the shelves rather than having it all more efficiently stacked away in a warehouse out the back.

It can also go the other way

[tixxit]

I'm in the market for a new TV, but haven't done any research. I see a TV in BestBuy that is on sale, compare the price to other stores, see it actually is a good price, then buy it. If I didn't have my smart phone, I would've gone home and did some research first, rather than buy it right there. That means I'm out of the store, and that most likely means a lost sale for them.

Similarly, I was at a (plant) nursery this last spring. I had the impulse to buy some plants for my house, but since I have a cat, I wanted to make sure I didn't buy a plant that was poisonous to cats. I whipped out my phone, went on the web, and researched the plants I liked, one-by-one, to find the ones that were cat safe. In the end I bought $100 worth of plants. If I didn't have my smart phone, then I wouldn't have bought anything.

evolution in action!

[esobofh]

Indeed, this is exactly how i shop. In Canada, the largest book chain is Chapters/Indigo - and they have a distinct error in strategy; they have made it policy to only sell books at the publishers recommended or listed price on the book. Now, everyone else in the book business sells at a discount, or with sales, etc., but not them - and another critical error, is that they won't match prices. So while i'm in their store, enjoying their starbucks coffee and free wifi while parusing their shelves, i'm logged into amazon.com (in the US) and "adding to cart" all the books i like. - before i've left chapters, i've ordered all the books i like from amazon at a huge discount (sometimes 50%) and have already received their order confirmation. It's great! although, not so good for chapters.

evolve or die!