Forrester: Having Different Web/In-Store Prices Is No Big DealWritten by Evan Schuman
Since the dawn of E-Commerce, retailers have struggled with whether they need to offer one price for the same product across all channels. Beyond the fact that online has a very different cost structure than in-store and can therefore profitably charge less, in-store managers have to deal with contracted minimum advertised prices (MAPs) set by manufacturers.
A new report from Forrester Research analyzes that dilemma and has one clean recommendation for today’s retailers: Don’t worry about it. Consumers either don’t care or they understand why the prices might be different. Let the prices be different and worry about more important matters.
“Most people don’t even think of doing comparisons across channels. There’s this perception that retailers feel they are losing because they had this policy of having to have consistent pricing,” said Sucharita Mulpuru, a Forrester VP and its principal analyst for eBusiness. “You don’t need to have this religious point of view. It’s OK if your prices are different in different channels.”
This debate is hardly new. In one of its last moves before the chain imploded, Circuit City established a one-price policy across all channels, a step partially accomplished by simply increasing Web pricing to match in-store MAP prices.
The Forrester report challenges some time-honored assumptions. For example, it says the perception that price-comparing consumers are bottom feeders who don’t have much money to spend is flawed. Well, they may well be bottom feeders, Mulpuru said, but they can often prove to be well-financed ones.
“Comparison shoppers tend to be higher income. They’re more educated and they understand the value of technology,” she said. “They are bottom feeders, but they’re rich as well. There are a lot of cheap rich people.”
Mulpuru’s point is a good one, but the analysis in the report supporting that conclusion is a bit thin. From the report: “The population segment that is most likely to use comparison-shopping engines—high tenure Web shoppers with more than 10 years of Web-buying experience—has household incomes that are 54 percent more than the segment least likely to use comparison-shopping engines”—that is, those shoppers with less than one year of experience shopping online.
The report, therefore, is saying that the universe of consumers who have less than a year of E-Commerce experience tends to be lower income than the universe of consumers who have more than one year of E-Commerce experience. It’s likely that in April 2010, the number of people who have less than a year of experience of Web shopping is going to skew a lot younger and/or especially Web-uncomfortable. Furthermore, I think it’s safe to say that the number of people who have only one year of E-Commerce shopping is decidedly smaller than a group consisting of those with “more than one year” of E-Commerce experience.
Still, as Mulpuru pointed out, “some 10 million households are coming online every year,” so it’s not as though a new Web purchaser is that unusual.