Retail Chains To Strike Back Against Online Vendors 532
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.'"
I buy less and less because of this kind of BS (Score:4, Interesting)
Way too much effort involved in sorting through all the buying options. E.g. I would use a new digital camera, but I can't be bothered sorting through a zillion camera models and retailers. I still have a decrepit dumb phone for the same reason.
I don't get any satisfaction from navigating the maze of hassle thrown up by retailers these days.
How about having the item in stock? (Score:5, Interesting)
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.
Offer price matching on the spot or throw in more (Score:4, Interesting)
This really isn't that difficult. If someone is coming into your store and won't buy from you because they can get it elsewhere for cheaper then simply match the price. Either that or throw in some extras like a free upgrade or accessory if they purchase the item in question.
I would always go into Best Buy and look through their enormous DVD library. The shop near me had literally hundreds of foreign films and shows in stock all in region 1 including a gigantic aisle of only anime films and shows. I'd show up, take note of what looked good, and then go online and find them for literally 50-80% off in brand new sealed boxes.
One time I wanted to buy a DVD and said that if they matched the online price of another retailer that I would buy it. They declined and I ended up buying it online later that day.
It's really not that hard for consumers who have a choice. You might occasionally need the convenience of immediate purchase at retail. But most of the time people can wait to order consume electronics or entertainment media. So they'll sacrifice immediacy in order to save money.
guilty (Score:2, Interesting)
I just did this last weekend looking for a new keyboard and webcam. I went into a local chain store, found the products I was looking for after picking them up and reading the boxes, scanned their barcodes with my android app, and found them online (amazon) for almost half the price with free shipping.
As a consumer I am simply making the best purchasing decision possible. This provides me the advantage of actually holding the product first before I make my buying decision, BUT that buying decision will be based on the overall cost and not a loyalty to chain stores. Chain stores who have stretched themselves so far in hopes of getting a piece of an increasingly shrinking market which now belongs to online.
So Target's reaction to the competition is to simply stop shelving products that are available online? That seems self defeating to me. At least I'm coming into your store, do a better job at keeping me there to buy things.
FTA "limited edition merchandise on a rotating basis" AKA "We're going to try and sell the same products everyone else has but put the name of a famous celebrity on them to convince you to pay double what you would pay online for the same tangible product. Then we're going to keep it around just for a few weeks and spend our marketing dollars telling everyone that it's a limited time offer!"
Change or die, those who refuse to change DESERVE to die.
Different SKUs already widely used (Score:5, Interesting)
Re:Luddites (Score:4, Interesting)
I would think that their worst nightmare is nobody coming to their store at all. Consumers are an impulsive bunch and I think the group of people that are willing to wait a week(s) and deal with package delivery to save sales tax is actually pretty small- and then what about impulse buys of other items they see in the store?
I call bull on this one.
Yes, but... (Score:5, Interesting)
Look at Trader Joe's. Sure, you can buy all that stuff elsewhere but it's cheaper because it's a "house brand." If Target can do this, more power to 'em.
This strategy doesn't have to suck as much as the Sears-branded Atari 2600 [wikipedia.org].
Does Target intentionally block cell reception? (Score:5, Interesting)
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.
Re:I do the opposite (Score:5, Interesting)
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.
Re:So just like the old Sears crap? (Score:4, Interesting)
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 in order to make the sale they had to match the on-line price while paying for all the overhead required to meet your "right that minute for class" criteria. How do you expect this to be sustainable?
Or, lets suppose it is sustainable. Why do you tolerate on-line retailers charging the same price while offering less service?
Re:Yes, but... (Score:5, Interesting)
Look at Trader Joe's. Sure, you can buy all that stuff elsewhere but it's cheaper because it's a "house brand." If Target can do this, more power to 'em.
This strategy doesn't have to suck as much as the Sears-branded Atari 2600 [wikipedia.org].
Trader Joe's works because they are very focused on the quality of the goods from their suppliers - if the stuff gets too many complaints, it's gone and they look for a new supplier. I must spend half my food money at TJ's simply because the food and produce are always top-notch. If the big supermarket chains had the same attention to detail TJ's had there never would have been a TJ's.
Re:Yes, but... (Score:5, Interesting)
I was in Target yesterday looking for board games and I saw that they had an entire line of exclusive board-game SKUs.
Unlike the standard boxes they were about 25% more but came in wooden boxes instead of cardboard. The target edition appeared to be a premium model.
Seems like a smart move to me. I also bought a Galaxy Tab from Best Buy since they exclusively had the white model. I can say for certain I wouldn't have bought it from Best Buy for any other reason.
In the case of Target I liked the option since they offered an exclusive product. In the case of Best Buy I just hated BB more since they were out of stock of all the accessories, nobody was helpful and the product differentiation was minimal.
So my advice for retailers is to be careful.
Comment removed (Score:5, Interesting)
Re:So just like the old Sears crap? (Score:5, Interesting)
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.
Right. As opposed to Amazon who offered nothing to make the sale at the same effective price and couldn't even meet the "same day" requirement. Yet, Amazon is somehow viewed as the gold-standard of value for the price-conscious customer.
My point is that either BB's model is unsustainable under your demands (i.e. forced to compete at prices that won't support their operating costs) or Amazon's prices are inflated (i.e. they are charging what it would cost to provide a local brick-n-mortar store service/support and pocketing the difference). Okay, maybe its a combination of the two.
Re:So just like the old Sears crap? (Score:4, Interesting)
Well, the reason for that is because the American worker is EXPENSIVE. So if you're manufacturing in the US, you want to minimize your labour costs. So what you do is automate the hell out of your production line - design for manufacturing. You redesign parts so they can be put together with robots, you redesign circuitboards so there's fewer of them and fewer fussy connectors that have to be hand-inserted and hand-closed, etc.
So the average American worker is damn productive because robots are doing 99% of the work, while he's doing the 1% that couldn't be automated reliably.
Contrast this with China, where automation is very few (labour is cheaper than automation) so the only thing keeping you from making lots of fussy parts is it takes longer to build (== costs more people and takes longer to assemble). Speeding up your testing by 1 minute can save a ton of money in China as that worker saves 1 minute per device they test. For a robot, it doesn't matter too much.
China's at the "labour intensive" part of industrialization - where goods require lots of manpower to manufacture. The US is at the "capital intensive" part of industrialization, where goods don't require much manpower, just a lot of seed money (robots are expensive, upfront designing for robots is more expensive in time and money, etc), but manufacturing requires very few people and is highly automated.
Of course, Steve Jobs was also wrong in that you don't need 30,000 factory workers to make your product because you'd only need 1/10th of that or less as robots are doing all the work of the 30,000, and the fewer Americans are just overseeing the production line and minor assembly.
Of course, the Chinese model is a bit more nimble in that a design change means re-teaching 30,000 people and a day to get back to full production. Reprogramming all the robots with the updated design and steps takes far longer (both in updating the designs and roles of each robot, and training each robot in its new role and then testing the final result), but with enough technicians (bit pricey) it can be done relatively quickly.