Retail Chains To Strike Back Against Online Vendors

Hugh Pickens writes "Marissa Taylor says the retail chains' worst nightmare are consumers who come in to take a look at merchandise in-store, but use smartphone apps to shop for cheaper prices online. But now stores like low-end retail chain Target plan to fight 'showrooming' by scaling up their business models and asking vendors to create Target-exclusive products that can't be found online. 'The bottom line is that the more commoditized the product is, the more people are going to look for the cheapest price,' says Morningstar analyst Michael Keara. 'If there's a significant price difference [among retailers] and you're using it on a regular basis, you're going to go to Amazon.' Target recently sent an 'urgent' letter to vendors, asking them to 'create special products that would set it apart from competitors.' Target's letter insisted that it would not 'let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands.' Target also announced that it had teamed up with a handful of unique specialty shops that will offer limited edition merchandise on a rotating basis within Target stores in hopes of creating an evolving shopping experience for customers. Target is 'exercising leverage over its vendors to achieve the same pricing that smaller, online-only retailers receive,' says Weinswig. 'This strategy would help Target compete with retailers like Amazon on like-for-like products.'"

Comments

So just like the old Sears crap?

[Anonymous Coward]

This will work for a few weeks before people simply look up the equivalent part numbers. Sears tried this already. It sucked, made headaches, and didn't help the problem at all.

Re:So just like the old Sears crap?

[hairyfeet]

And the "store brands" will be shite on a crusty roll. look at the Best Buy "exclusive" computers, they are the lowest POS garbage that any OEM can scrape together, every part of them is crap from the caps to the plastic. it won't take long for people to realize the ones that can "only be found here" will be the junk piles, like those BB and Staples "exclusive" laptops where they stick some desktop CPU like a bottom of the line Celeron or Pentium in a cheap laptop and pass it off as a good deal.

The best way is to not try to make funky store brands but to simply offer incentives to buy. When my oldest needed a laptop right that minute for class after the old Dell gave up the ghost he went to two local stores, the Staples and Best buy. The Staples were doing nothing but bait and switch, every model he would look at on the floor was magically out of stock but they could get him 'something similar' for a $300 markup, instead we went to the local BB and when they saw he was comparing prices the floor guy said "I'll throw in a bookbag and cleaning kit" and sealed the deal. Later when we checked online they sold it to him within $40 of the average price and the bookbag made up for the difference so we were happy.

So you can still make the sale in retail, simply offer the customer a good deal. I went amazon for my netbook, not because i had something against the local shops, but all they had were Atom crap and i wanted an AMD, now i go into the local shops like Walmart and best buy and i see they have quite a lot of nice AMD Fusion based so if i needed another one I could be tempted if they throw in a little swag or offer a decent price. The local staples still sucks though, last time I went in there with a customer who wanted me there to help decide on some monitors for his business what did i see? same old bait and switch BS. I got so disgusted that even though the BB is 35 miles away i said 'Hop in my truck and we'll get you some monitors". treat the customer right they'll buy, try to screw 'em and watch those sales walk out the door, its really that simple. that customer spent nearly a grand on monitors that day and those sales COULD have been Staples if they wouldn't have tried to screw him. I can't bitch too much about their douchebag tactics though, the customer was so impressed i was trying to keep him from getting ripped off he bought an extra 22 inch and handed it to me for my trouble as well as threw $2000 worth of business my way building the machines for his office. So I guess i should thank Staples for being douches, it certainly made me look better by comparison.

Re:So just like the old Sears crap?

[PRMan]

Maybe they could sell American-made products.

Re:So just like the old Sears crap?

[hairyfeet]

Oh please! Do you HONESTLY think they paid MSRP for either the laptop OR the bookbag? The cleaning kit was MAYBE $2, the bookbag MAYBE $8, and they probably made at least $40 on the laptop. So they made out just fine friend, it was the fact they were willing to offer SOMETHING, even if it was cheap, that helped to make the sale.

And as someone who IS an actual retailer frankly its just good business. I often will pick up cheap keyboard mouse combos for less than $10 when newegg or Tiger is having a sale so when someone is looking at a tower I can say "Hey i'll throw in a new keyboard and optic mouse, no charge" and you'd be surprised how often that works. With laptops i use cheap 4-8Gb thumbsticks or if it has a card reader a cheap SDHC card. Does this hurt my bottom line? hell no, all it means is I'm making $50-$60 on the unit instead of $60-$70, big fricking whoop. but it makes the customer feel special to think they got "something extra" and that good feelings equal more business and they are more likely to send others your way.

Its business 101 guy, you want to build a rapport with the customer and make them feel good about buying from you. Throwing in some cheap swag that we frankly didn't pay hardly anything for doesn't hurt our bottom line while making the customer more likely to give us repeat business and IT WORKS. My oldest has gone back to that same BB and bought a whole bunch of extras for that laptop, like USB speakers and a briefcase for when he doesn't need the bookbag, all kinds of little extras, why? Because they made him feel good about buying from them, that's why. Its such a simple thing and it amazes me so many businesses have forgotten that.

Remember that $2000 sale i posted about earlier? Know how I got that account? The guy came in on a sat and was hurting because he needed to get some bookkeeping done by Mon and his PC crapped out on him. I yanked his drive and slapped it into one of my spares so he could get his data and showed him how to access it and told him "You just use this spare while I get the parts ordered for yours, that way you aren't gonna have any downtime" and that simple little act of making sure he wasn't jammed up not only got me his office, but the print shop down the street, a nice upgrade of the dorm at the local college, and three customers that have been steady buyers for nearly 2 years now, all because of treating one guy right and keeping him from hurting. he quickly spread the word about how well i treated him and the business rolled in. Hell i haven't even had business cards in over a year, I've had too much work to even need the things, and just word of mouth keeps me swamped most weeks. treat the customers right and they'll buy, simple as that.

Re:So just like the old Sears crap?

[icebraining]

now that manufacturing is all but dead

It is?

According to United Nations data, the U.S. is still the largest manufacturing country in the world. In 2009, American manufacturing output (in real terms) was nearly $2.2 trillion. That's about 45% larger than China's, at just under $1.5 trillion.

Can China compete with American manufacturing

I do the opposite

[Anonymous Coward]

I do the opposite of what this article suggests. I'll look up reviews or whatever online, and instead of waiting around for shipping I go out and buy it. I've even done this with Target.

If they stop carrying these products, then I will never be buying from them, since they'll have nothing I want to buy.

Re:I do the opposite

[zAPPzAPP]

Every time I try to do this, the first 3-4 shops I visit don't have the item in stock.
And of course none of them offers a list of their items online.

Re:I do the opposite

[rec9140]

"Just lookup the item # online and call ahead to the store. If they have it as"

Whoosssssshhhhhhh!

The whole point is NOT to use the phone! Point click go pick up. Seriously the level of stock intergration systems in the 21st century utterly sucks!

X store should be able to ACCURATELY tell me that widget 12345 is in stock in store 788 with 32 and its accurrate when I pulled it.

I've seen this all to often from all sorts of stores offering pick it up now services...

Then ... how can it be in stock in the store and be out of stock online? ? ? HMMM??? IT CAN NOT!

The store should shove it in a box and UPS/USPS it to me! If the warehouse is out of stock and stock is in the store(s) then ship it to me! GO FETCH TIME! Hence why accurate stock systems need to be in place, and I seriously find it out of place that in 2012 this is not the norm.

Re:I do the opposite

[Anne_Nonymous]

Just as a warning, it turns out that Home Depot will not hold your caulk up front for any length of time.

Re:I do the opposite

[AngryDeuce]

Oh, believe me, the internal systems know exactly what they have in inventory, how much is there, and how much they're expecting in future orders.

Target especially, I know this from first hand experience, their internal systems track everything, they have an elaborate warehousing system that is updated constantly by warehouse personnel wielding LRT's (barcode scanners that tie into the inventory system) as they deal with overstock, as well as do replenishment pulls to keep the shelves stocked. You can also see what every store carries via their intranet for stock balancing purposes...they know what's coming on every trailer days before it gets there. It's all barcoded.

It would probably be trivial for them to hook that system into their forward-facing website, but they don't want that. They'd rather you get in the car and drive down to the store and impulse buy a ton of crap you weren't actively looking for. That's pretty much every big-box retailer.

Allowing people to get what they want and get out is the last thing they want, so outright telling you if they have something for sure via the web will likely not happen. Even if you can confirm it is there, good luck getting a hold on it so you can run over and pick it up.

Well, good for them

[Anonymous Coward]

At least they're not trying to legislate their way out of it.

The problem with this is

[jodo]

The problem with Target-exclusive products is there will be no way to read reviews as there will be essentially none online. And I don't buy anything of substance without researching it.

Luddites

[Tablizer]

Instead of fight against "lookers", embrace them. Who cares how the sale is made: if having a store improves online sales, that's a good thing. And, have the stores shift into a service center instead of just a physical catalog. A physical presence to demonstrate features first-hand and help trouble-shoot on-the-spot is sorely lacking online.

Change with the times, guys. Sure, you'll have to shuffle around your business model a bit, but the sooner you embrace the new model instead of fight it, the better.

How about having the item in stock?

[Anonymous Coward]

So, let's see...I drive 25 miles (each way) to Best Buy to try out a gizmo. The price at Best Buy is $250, the price at Amazon is $235.

It's not worth $15 to me to wait, especially as I've already committed to drive 50 miles. So I tell the sales droid to grab one for me.

Turns out that they don't actually have it in stock, but offer to order it for in-store pickup next weekend. For $250.

At that point I click the order button at Amazon on my cell phone, and it's at my house in mid-week. For $235.

You lost a sale, Best Buy. This has happened multiple times. Ever since Circuit City went under, Best Buy has down way downhill.

Amazon didn't kill you. You killed yourself.

Re:Somehow this won't turn out well.

[firex726]

A lot of places that do price matching already do this.

It'll be SKUs #####A, #####B, #####C.

Retailers #1, #2, #3, each get the respective SKU, despite being an identical product. And when you try to price match they won't as it's technically a different item. Of course they leave off how they are the only ones who sell that SKU and thus would price match themselves.

Re:Right....

[vux984]

Don't bother adding *real* value

I'm curious what "real value" you suggest they add?

The local bookstore has a coffee shop, lets you preview the books in comfy chairs, has kiosks to let you see what's in stock and where in the store it is, a whole bunch of staff, a club/rewards card...

And its pretty busy too.

But half the people i know, walk in browse around, look it up on amazon on their smart phone, and if they can get it a dollar cheaper online will walk out without making a book purchase.

I think they've realistically done everything they can, short of simply matching amazon's prices. But that's not a value add, and a race to the bottom is a losing proposition for the retail world... amazon can lower prices more than a store in can. So they'll be out of business before they can win.

Why I never shop retail anymore...

[EmagGeek]

ME: "Hey, do you have an XYZ Widget Plus in stock?"

Them: "No, that's not a normal stock item, but I can order one for you and have it here in a week for $250"

ME: "I can order it from Amazon Prime and have it here TOMORROW for $215, sorry."

The ONLY reason to go into a brick and mortar store is if you absolutely have to have it right now. Brick and Mortar did not adapt to the advent of online shopping. It's their fault. They needed to realize that they could no longer sell commoditized items. They would have to offer some REASON to pay MORE in a store. Without a significant value add, there's no reason to even set foot in a store anymore.

try service for a change

[reemul]

I'm with you - the one idea that the big box stores absolutely refuse to contemplate is competing based on _service_ instead of _price_. Most of them already used low prices to kill off the local small stores that provided real service to the shopper and community, now that they're getting creamed by Amazon they suddenly are all about supporting the local store.

You want to be the "local" store, Mr. Big Box Chain? Try some actual service. Stores that make sense, staff that understands the product and wishes to help rather than just upsell warranty packages, "sale" prices that are actually below the normal price that I need less than 2 seconds to find with my phone. Some products I really want to be able to touch and examine with my Mark 1 eyeball, which I just can't do online. Or ask questions in real time, with the product in front of me. Make that happen, make the experience pleasant, and I'll buy from the physical store over the online store if the prices are even close.

Too often I go into a place like Best Buy absolutely intending to buy a specific thing and fail. The stores are laid out to some layout designed to make you walk past as many impulse purchase racks as possible, rather than getting you right to the thing you actually want to buy. The staff isn't judged on whether they are helpful or even friendly - their metrics are all about sales, without teaching them any skills at interaction that might make sales happen. The item might not be in the place it should be, but good luck finding a minion to check the system for where it is, or whether it is out of stock. Forget service, try to go to Best Buy and not get angry.

As long as the brick and mortar guys lose on both sales and service to the online retailers, they're inevitably going to die, unmourned. I acknowledge that they probably can't win on price. How about, just for giggles, trying service, just once?

Re:try service for a change

[ediron2]

Actually, customers largely refuse to buy based on service. Among the service-is-king tier, there's room in the market for Neiman Marcus and... uh... well, that's it. Everyone else that tries, regrets the move. It's like newspapers blocking access to content behind a paywall. Everyone has to try eventually, and each time it fails: consumers race toward the bottom on cost far faster and more forcefully than they pay attention to quality and service. I don't like this, but it's a dominant rule of market economics. Incidentally, the same market economics are behind America's jobs *sprinting* to China. The example I've been watching most recently is the Raspberry Pi team's decision that they can't afford to manufacture in the UK as they'd hoped. Time and costs were too much to overcome.

Does Target intentionally block cell reception?

[afabbro]

There are two Targets near me, and I live in a major US suburban area. Outside either, cell phone reception (Verizon) is excellent. Ten feet inside the store, it drops to one bar and by the time you get very much further, it's NO SERVICE. It is generally impossible to call out or in to a cell phone in Target, or even to send SMS. It has been that way for at least three years, and my wife (who's lived in this part of town longer) says it's been that way as long as she can remember. Other friends say the same thing.

I'm sure Target doesn't have cell phone jammers installed - that would be illegal. But I wonder if they've designed their buildings to be cell-signal-unfriendly? I can imagine it has all sorts of benefits - employees can't covertly text while on duty, and shoppers can't price-compare on the Internet.

I have no proof...just my anecdotal experience.

There is a large Wal-mart supercenter near us, and my Verizon cell works fine throughout, only losing a bar or two in the middle of the store, which is several times the size of Target.