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Mobile-enabled price transparency is a challenge for retailers

Consumers are increasingly turning to their mobile devices to find the lowest prices while they are in stores. According to a recent study by RSR Research, this growing trend is not only forcing more competitive behavior between retailers, but also exposing different prices by geography and channel within a retailer’s chain.

“Smartphones are what are really breaking down the walls of the retail stores,” said Nikki Baird, managing partner at RSR Research, Denver. “Apps like RedLaser give consumers easy access to prices on products that have bar codes.

“And, things like Amazon’s image search and Google Goggles are enabling consumers to search for alternate prices just based on how something looks – so that Banana Republic jacket might not be able to be purchased anywhere else, but a consumer might be able to find something close enough for a lot less,” she said.

“Plus, as search engines return location-oriented information, it’s not only placing Web and store prices side by side, it’s placing store prices in the same chain side by side, and many times those prices are different because retailers utilize geographic pricing models. That puts the retailer in a bad spot with the customer – having to explain why something costs less when it’s only 10 miles away.”

Price comparison
Comparing prices has become a popular pastime for mobile consumers.

Using different applications such as RedLaser or Amazon’s Windowshopper app, consumers can take a picture of a product or scan the bar code to get a list of prices from different retailers.

The mobile phone is changing the way that consumers shop and browse for products and is making retailers change their approach as well.

Additionally, as mobile devices continue to gain momentum, retailers are competing with online retailers to get sale.

“Explaining different prices in different stores, retailers have in the past competed with different prices online versus in the store because they argue that it’s a different competitive set online – Target or Walmart only compete with Amazon in the online space, not in a neighborhood,” Ms. Baird said.

“If the online cost structure is lower, then online-only companies will have lower prices, and the item on the shelf loses in comparison, or the retailer has to take a margin hit in order to price match – but the product on the shelf has delivery costs already built in and the item listed online – does the consumer take that into account,” she said.

“Sometimes they do, sometimes they don’t, but regardless, a lot of retailers are considering the Amazon Prime model of membership shipping that would take that off the table and make things look even worse for the in-store item.”

Mobile research
According to RSR’s “Optimizing Price in a Transparent World: Benchmark 2011” study, retailers are responding to this trend of price comparisons by offering targeted promotions.

The study found that many retailers are in panic mode and do not know how to handle the emergence of these price comparison services.

Retailers are looking to keep their customers and to offer them the best price and services.

However, if a customer sees a cheaper product at a retailer’s competitor, than that retailer has lost that sale.

“Right now, a lot of retailers’ store teams are in panic mode – just blindly price matching,” Ms. Baird said. “That’s easy enough to do when the volume of requests are low.

“But, as more and more customers ask, that will get expensive,” she said. “I think there’s a negotiation in there with consumers over whether they’re taking shipping costs into account or whether they should.”

Mobile shopping behavior
Almost half – 48 percent – of consumers use their mobile devices to research or browse products and services, according to Oracle’s “Mobile Trends: Consumer Views of Mobile Shopping and Mobile Service Providers” report (see story).

Additionally, sixty percent of users aged 18-34 use their mobile device to research products and services, up from 41 percent in 2009.

Mobile consumers ages 35 and older are nearly twice as likely to leverage a mobile device to research products and services, growing from 19-36 percent for users aged 55 and older and 23-44 percent for those 35-54 since 2009.

Earlier this year, Motorola Solutions rolled out its annual holiday survey that found that  a majority of retailers—87 percent—believe that shoppers can easily find a better deal using their mobile devices, so customer service aided by access to real-time information is more important than ever.

The survey also found that retailers that are not investing in mobile technology to stay ahead of increasingly tech-savvy shoppers are hurting their own bottom line (see story).

Ms. Baird also said that retailers should not underestimate the value of right now.

“The item is here, you can go home with it right now versus waiting for it to show up in a week via your free slow shipping,” Ms. Baird said.

“But also, if I were a store-based retailer, I would be pushing hard for the Internet sales tax, because it would put their store merchandise on a more even footing with online-only retailers,” she said.

“Some states are already putting that on the table – Colorado is one, where I’m located – but as a store-based retailer, I’d want that price comparison with online to be loaded up with as many total costs as possible, to help even-out the comparison.”