Yesterdays Wall Street Journal had this article and news out of Best Buy (see Best Buy stung by weaker sales and earnings | Business Tech - CNET News) clearly showing that the tide is turning and that this is becoming a normal part of retail today.
As I've recently discussed during my future of retail presentations with the Retail Advertising & Marketing Association, I believe that retail will be divided into two main categories:
- Commodity shopping. This is shopping almost strictly on price. This could be items like socks, underwear, milk, etc. Those items that we buy frequently and sometimes we're not even aware of the brands we're buying. We're really starting to see this move into categories like consumer electronics, where people may be focusing more on price then the specific brand or technology.
- Experience shopping. These are the items that we pay more for based on the experience we get. This is why we pay more for Apple products or why we use one dry cleaner over another. It's why there are many restaurants of all different price points. Sometimes a dollar burger does the trick, sometimes we want the $20 version.
If all you're offering is product, then all you have to compete on is price. And if all you have to compete on is price, well, then people are going to use their cell phones to see if you have the best price. And price is is where online retailers can excel. But even online retailers understand the role of experience, just ask Zappos.
For physical retailers, there's an even greater challenge. For many of them, it's not like they can just close up their stores and move everything online. Think of what would happen to our economy if even a handful of retailers decided to close up all of their physical stores and lay off a few hundred thousand people. And how would it impact their business anyway? Sure Sharper Image saved a lot of money by closing their stores, but do they even still exist today?
Take a look at your retail experience from top to bottom. Are you offering anything of value other then the product? Are you helping the guests in a way that makes them feel confident in purchasing from you? Are your employees committed and engaged? Do they know your brand story? Online retail still only accounts for about 10% of the total retail industry, but cell-phone price checking tools might help change that for retailers with no other point of differentiation.
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 Amazon.com Inc.'s website for only $106.75, no shipping, no tax.
"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."
Mr. Tang's smartphone reckoning represents a revolution in retailing—what Wal-Mart Stores Inc. Chief Executive Mike Duke has dubbed a "new era of price transparency"—and its arrival is threatening to upend the business models of the biggest store chains in America.
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.