Thursday, December 16, 2010

Phone-Wielding Shoppers Strike Fear in Hearts of Retailers

From the Wall St. Journal. Of course--they counted on (and profited from) our lack of ability to comparison shop on the spot, but technology changed all that. Now all we need is a local grocery store price comparison app, and BAM! Coupon queens everywhere will suddenly be unemployed, as will marketers.

"Tri Tang, a 25-year-old marketer, walked into a Best Buy Co. store in Sunnyvale, Calif., this past weekend and spotted the perfect gift for his girlfriend.

Last year, he might have just dropped the $184.85 Garmin global positioning system into his cart. This time, he took out his Android phone and typed the model number into an app that instantly compared the Best Buy price to those of other retailers. He found that he could get the same item on Inc.'s website for only $106.75, no shipping, no tax.

Tri Tang uses his mobile phone app, TheFind, to scan product bar codes and immediately troll online for the best price at various retailers.

Mr. Tang bought the Garmin from Amazon right on the spot. It's so useful," Mr. Tang says of his new shopping companion, a price comparison app called TheFind. He says he relies on it "to make sure I am getting the best price."


"Until recently, retailers could reasonably assume that if they just lured shoppers to stores with enticing specials, the customers could be coaxed into buying more profitable stuff, too.

Now, marketers must contend with shoppers who can use their smartphones inside stores to check whether the specials are really so special, and if the rest of the merchandise is reasonably priced.

"The retailer's advantage has been eroded," says Greg Girard of consultancy IDC Retail Insights, which recently found that roughly 45% of customers with smartphones had used them to perform due diligence on a store's prices. "The four walls of the store have become porous."

Some of the most vulnerable merchants: sellers of branded, big-ticket items like electronics and appliances, which often prompt buyers to comparison shop. Best Buy, the nation's largest electronics chain, said Tuesday that it may lose market share this year, a downward trend that some analysts are attributing in part to pressure from price comparison apps."

Unfortunately, the entry fee for that arena is running at about $80/month for the Smartphone voice/data plan. If shopping this way leads to $960 or more per year, it might be worth it. But then again, how often are you going to be in the market for a TV, computer, or other electronic stuff? This is why I 'd like to see an app made for local grocery stores--this way, EVERYBODY can make use of this no matter where they live (since grocery store chains tend to be regional), and EVERYBODY would be sure to save at least the $80/month it would cost just to pay for the phone plan. Since some Smartphones can be found for free (but you have to sign up for certain plans), the cost of these plans could very well be paid for just in grocery savings.

I'm going to look into these now, and in the future, as plan prices will surely drop as time goes by.

"Although store executives publicly welcome a price-transparent world, retail experts don't expect all chains to measure up to the harsh judgment of mobile price comparisons. Some will need to find new ways to survive.

"Only a couple of retailers can play the lowest-price game," says Noam Paransky, senior manager at consultancy Kurt Salmon Associates. "This is going to accelerate the demise of retailers who do not have either competitive pricing" or a standout store experience.

I wrote previously about dwindling competition, dwindling choice, and dwindling sales here (last 2 paragraphs).

Because consumers made more frugal by the economic downturn are flocking to the cheapest offers they can find, comparison shopping via smartphones is making it harder for many retailers to charge higher prices in stores than on their websites."


"The shift in consumer behavior also imperils some of the most lucrative aspects of selling in stores, such as the ability to use salespeople to lure customers into making impulse buys, or entice them to buy one thing after they came in for another. A 10-country study by management consultant Accenture this year found that 73% of mobile-powered shoppers preferred peering into their phones for basic assistance over talking to a retail clerk.

For diehard deal-hunters such as Mary Saunders, a Virginia mother of two, the phone is fast becoming the weapon of choice in the battle for the best bargain. Hunting for Christmas gifts on a recent afternoon, Ms. Saunders used her iPhone at several stores to scan bar codes on every item on her children's Christmas wish lists, saving $2 here and $3 there.

Ms. Saunders still gathers newspaper circulars and visits all the big stores near her home in Stephens City, Va., to scrutinize specials. But her phone gives her a new sense of empowerment.

"I am slightly obsessed with getting the best deal," says Ms. Saunders, a substitute teacher. "So to me, the bar code scanner is the coolest thing in the world."

While e-commerce experts say many U.S. retailers have been slow to react to the mobile trend, some are starting to see that there is upside as well as disruption: Now retailers can virtually target customers inside competitors' stores."


"The hard sell doesn't stop there. If a customer inside a Best Buy compares prices through TheFind and discovers a better deal elsewhere, the retailer also makes one last pitch for the sale with ads showing them deals on other products at the store, such as a similar Blu-ray player that comes with a free movie disc.

"Instead of letting that person walk out, you are telling the customer, 'Look, we know you're already here, let's make a deal,'" says TheFind's Chief Executive, Siva Kumar. "It is not a consumer-only game. Retailers can use it to their advantage."


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