Target Looks to K.O. Amazon Price Check

CEO, Market Platform Dynamics
3:33 PM EDT March 15th, 2012

The media was abuzz last week over Target’s clever move to combat “showrooming.” Showrooming is the latest word to take up entry into Webster’s dictionary and describes the following phenomenon: consumer with smart phone and Amazon’s Price Check app uses physical store to zap a product’s bar code to get pricing and product info, takes up sales person’s time to get questions answered, then buya the item from Amazon at their discounted price (plus a $5 kicker presented as a further bribe to use the app and buy from them).

When Price Check was initially introduced in December of 2010, it was reported to have had a significant impact on holiday sales. Since then, it has been the bane of many a small and large retailer existence as consumers, many now trained to follow the best deal, feel absolutely no remorse about using a physical store merchant’s facility to kick the tires, only to buy those proverbial tires from Amazon cheaper.

Target’s counter punch last week was a missive to its suppliers asking them to make and distribute exclusive merchandise only available at their stores, making the whole notion of price checking irrelevant. Their store merchandising strategy also includes the “store in store” approach creating a unique product mix muddying the online price check opportunity further. Target’s motivation is obvious – keep from being disintermediated. Their suppliers’ motivation is also obvious: salute if they want Target as a customer. It would be hard to imagine that Target will get any pushback either – suppliers don’t want their margins squeezed any more than Target does.

As you can imagine, there are a variety of opinions on the showrooming topic, and Price Check in particular. Some I’ve talked to say all’s fair in the new “smart” world of mobile apps and price transparency. Others have said that it’s no different from people running around to a variety of car dealers, driving cars, and then playing one dealer against the other. On the latter point, I’m not so sure. In that scenario, dealers know the drill, and have a face-to-face fighting chance to win the business. On the former, well I am not sure it is that simple.

Certainly, technology–and technology in the form of a mobile app–is changing the nature of the relationship between consumer and retailer. In 99% of the cases, though, that intent of that change is to strengthen the bond between a merchant and a consumer. For the purposes of this piece, let’s not get hung up on whether the underlying tactics are actually having said result, but agree that the spectrum of tactics – discounts, offers, loyalty/promotions – are designed to foster a healthy relationship between consumer and merchant, even if that relationship is being facilitated by a third party, like a deal site.

Enter Price Check. The intent of this app is also very simple and designed to strengthen the relationship between consumer and merchant. This time, however, it’s using a third party – Amazon – to disrupt a relationship or a potential relationship between a consumer and a merchant. One could argue that a consumer that would actually spend time in a physical store only to buy via Price Check on Amazon might not be a target customer for that merchant anyway but who’s to really know? But for the Price Check app, that merchant could have snagged a customer.

The truth of the matter is the intersection of technology, mobile phones and the plethora of apps that goes along with it is becoming a bit of a double edge sword today for merchants. One the one hand, it is helping drive traffic into their storefronts in new and creative ways and making it more efficient for consumers to discover offers and opportunities and new merchant relationships wherever their smart phones take them. On the other, it can also have the effect of leveling the playing field around only one attribute – price and who has it cheapest. And, although Groupon has proven the point that when made cheap enough, tons of people will buy stuff they never would have otherwise (e.g. a voucher for a no-name restaurant 50 miles away in the boonies) most merchants don’t want to build their business or even acquire customers that way. The Groupon experiment, if anything for most merchants, has proven that deal hounds don’t convert easily if at all to lifetime customers.

That brings me back to Price Check. When doing my research for this piece, there were a ton of articles with merchants characterizing it as ‘evil’ and “despicable”- especially from the more main street merchants who don’t get the same price advantages as an Amazon or even a Target and who feel most vulnerable. They are the guys who seem to be getting the real raw end of the showrooming stick. And these are the guys who are painfully aware of the impact that Amazon has had on local bookstores – which today are as rare as hen’s teeth. They don’t want to be Amazon’s next collateral damage.

While I too think that it is pretty crummy for Amazon to blatantly build its business on the backs of merchants that have invested in physical storefronts, Price Check presents a great opportunity for merchants to get creative and to fight fire with fire. Target’s move to basically create a version of private labeling merchandise is brilliant and iterations of it something you’ll likely see more of the larger merchants embrace, along with advertised limited inventories that compel immediate purchase and the launch of new and innovative loyalty offerings that blunt Price Check temptations. Smaller merchants, who strive to create relationships with their more locally based customers, will continue to differentiate via smaller quantities of less mass-inventory merchandise while emphasizing local roots, personal service, and fair but not necessarily the cheapest prices.

The great opportunity that Price Checker has created for physical retailers is the chance for merchants to use technology to step up their game in order to better serve their customers and create the kind of relationships that can withstand the temptation of a few bucks off the suggested retail price. It’s why what Square is doing with Card Case and Register and what PayPal is doing to drive foot traffic into stores to make purchases is so appealing to merchants large and small.

The $1 trillion question is how consumers will actually respond. The bad economy still has consumers nervous about opening their wallets that creates more pressure on price than value. Maybe apps like Price Check can be turned into the mobile version of car dealer negotiations – starting conversations with merchants who have the chance to convert apps users into customers – even if it means shaving a little off their price to do so. That strikes me as a most fitting “turnabout is fair play” ending, wouldn’t you say?!!


Karen Webster is the CEO of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.


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