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?

[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?

[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?

[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?

[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?

[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?

[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?

[rjstanford]

Hmm. Perhaps you could call it Target?

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.

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.

In completely unrelated news

[elrous0]

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

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

[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?

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.

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.

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.

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.

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.