Posted at: 01/08/2013 11:39 AM
By: Leslie Dyste
Target Corp. is pledging to match prices of select online rivals year-round, a move that underscores how physical and online retailing are being meshed together.
Matching online prices is rare but expected to become more common as shoppers move increasingly online. Target, the nation's second largest discounter behind Wal-Mart Stores Inc., said it will match prices that customers find on identical products at top online retailers, all the time. The online list includes Amazon.com as well as the websites of Wal-Mart, Best Buy, Toys R Us and Babies R Us.
Target's move follows a similar holiday price match that began Nov. 1 and ended Dec. 16. Target is also making permanent its holiday offer of matching prices of items found at its stores with those on its website. And for the first time it will include products that are out of stock on Target.com.
The moves follow a disappointing holiday shopping season for the Minneapolis-based retailer, hurt by stiffer competition from online rivals and stores like Wal-Mart that have hammered its low prices. It's also the latest step from brick-and-mortar stores to combat "showrooming" - a growing trend for customers to browse stores to check out products, and then go online to buy the same products for less.
Mark Schindele, Target senior vice president of merchandising operations, noted the discounter monitors prices of 30,000 items, and thousands more online, to make sure it's competitive. But Target says it had to do more to give shoppers more confidence.
"We believe that our prices are competitive year-round," Schindele said in an interview. "We also know that our guests shop in many ways."
Many major stores have offered price matching guarantees for local competitors' brick-and-mortar stores, but it wasn't until this past holiday season that the focus was on matching online prices.
Analysts believe that the trend will increase as stores are realizing they need to wake up to the increasing shift among consumers to online, which accounted for about 10 percent of holiday sales this past season. Still, such policies can be difficult in practice, because online prices tend to be lower and fluctuate often.
Best Buy is matching prices with 20 online retailers on electronics and appliances at its physical stores through Jan. 31. Best Buy spokeswoman Amy von Walter would not say whether it would make that plan permanent.
Since last summer Toys R Us has been matching online prices for all identical items or models of baby gear from selected national competitors Like Target's policy, it excludes Amazon's third-party Marketplace items.
Wal-Mart has trumpeted its low price message but stopped short of matching prices with online rivals.
The Bentonville, Ark., retailer said it can monitor prices across the Web every 20 minutes. That knowledge has helped the discounter better react to the competition's price changes.
Joel Bines, managing director and co-head of the retail practice at AlixPartners, praised recent moves by retailers to have an online policy.
"Retailers have finally gotten the message," he said. "You can't put an impediment between consumers and consumption." But he said that the policies can backfire.
Stores have to make it easier for shoppers to get the price match. And he noted the move could also turn out to be "profit draining" as more people are encouraged to shop the Web to get the lowest price.
Bines and other analysts say the online price match policies are also tough to implement given the constant fluctuation of online prices, even in the same day.
That was particularly evident around Thanksgiving week. From Nov. 19 to Nov. 30 Amazon.com doubled the average number of promoted products it changed prices on each day compared with the same period a year ago, according to Dynamite Data, which tracks online prices.
Still, having a price match policy in place is essential for cheap chic Target, analysts say. The discounter, known for selling trendy merchandise and staples like toothpaste under the same roof, has seen uneven sales growth since the economic downturn as it tries to convince frugal shoppers it has good prices.
This past holiday season, Target chose to limit promotions to preserve profits. That resulted in muted sales in November and December. However, Target expects fourth-quarter earnings to meet or possibly top the low end of its previous outlook.
As for the holiday price match plan, Schindele noted that shoppers like the plan. Price matches may be requested at Target's guest services desk prior to purchase, with proof of an online competitor's current price or after purchase with the original Target receipt and proof of the lower online price.
"This has been a seamless experience," Schindele said. "There have been a lot of positives."
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