Industry Voices : The Art of the Possible
Address price-roaming instead of worrying about showroomingJanuary 2013 By Peter Weedfald
In order to survive and grow, a retailer’s rate of change has to accelerate faster than the rate of consumer change.
For the last 60 years, retailers have collectively trained and motivated consumers—through advertising and marketing across every demographic—to be hyper-sensitive to price. J.C. Penney, for example, recently learned that you can’t take away coupon promotions, discounts and savings from consumers and expect to grow profits. Why? Because retail is based on legacy brand performance, tough competition, supply based economics, and consumer price sensitivity. More than ever, the retail industry serves an army of smart, well-trained shoppers who love to price-roam to find the best prices they can.
By the way, J.C. Penney just delivered one of its worst quarters ever: sales declined 23 percent to $3 billion dollars, same-store sales fell 22 percent and Internet sales sank 33 percent to $220 million dollars. It’s time for J.C. Penney to reinstate discounts and sales, generate traffic and re-motivate same-store sales growth. So says consumers; so says stockholders.
In contrast, Costco, Walmart, Kohl’s, Sam’s Club, Macy’s, CVS, P.C. Richard, hh gregg and Amazon, along with many more retailers, have proven that the best price-value equation works extremely well for their customers and profit-hungry stock holders. Frankly, the consumer just wants to pay the best price for same products, especially categories above $100.
Consumers, not manufacturers or retailers, rule. Consumers demand best price and do not want to find out they paid more for the same product elsewhere. Consumers are not willing to pay extra just because you have a large retail store, sales people or tech support. This is fair, and retailers need to adapt to over-exposed, under-leveraged pricing online in order to compete.
Retailers that decide to carry physical overhead must remember that consumers will decide whether or not they’ll pay extra for the experience of in-store shopping.
Supply based economics is alive and well. That’s why I strongly believe that retail should drop the term “showrooming” and replace it with price-roaming, which is essentially shopping, something consumers have been doing since day one.
Every retailer dealt with price-roaming long before consumers started carrying smartphones and using them for whatever reason on the sales floor. But with today’s transparent pricing and ubiquitous lowest price, retailers who compete for a consumer with the same class of product and same SKU need to offer their most aggressive and competitive prices. Buyers are smart. They are informed and price sensitive. They have immediate access to a variety of important opinions and social platforms that deliver price equality. Consumers not only want a fair price, they want the best price.
Let’s take a look at how Kohl’s handles price-roaming. Throughout its stores, the retailer uses electronic price tags. Based on whatever reason arises—competitive pressures, new opportunities, increasing the average ticket, etc.—Kohl’s can change pricing for each SKU on demand. Kohl’s has leveraged price-roaming to its advantage, instead of constantly fretting about what to do about showrooming.
To understand and take advantage of showrooming is to understand that the consumer is constantly seeking and demanding an equal purchasing playing field in-store and through the big buying cloud in the sky. Bravo to Kohl’s for leveraging a very consumer-centric approach to sales and for practicing P&L smarts. All brick-and-mortar retailers can execute the same change-agent process as a way to compete, drive traffic, and grow sales and profits. Speed to price parity is now Kohl’s weapon of choice in their retail environment, just like Amazon practices in the cloud.
Kohl’s effort to deliver competitively matched pricing has had an immediate and positive impact on its business. The retailer recently announced plans to hire 52,700 seasonal workers this year, a 10 percent jump from last year. It also plans to hire an average of 41 full-time workers per store, a four percent increase from last year. The company also plans to hire 5,700 seasonal employees at its distribution centers and another 30 seasonal positions in credit operations.
Smart shoppers seek smart price-sensitive retailers. Clearly, when retailers meet fair and equal price expectations, consumers will help retailers meet their expectations for success.
Peter Weedfald is president of Gen One Ventures and the author of Green Reign Leadership.