We are seeing the first signs of reverse commoditization:
- In early January I predicted that mobile shopping tools would make pricing and availability completely transparent to shoppers, which would drive retailers to compete on customer experience rather than price.
- On February 1st, Google announced their mobile shopping app for the iphone.
- On February 4th, Best Buy’s CTO and Geeksquard founder Robert Stephens replied to one of my tweets:
@Retailgeek: As #mobile gives shoppers perfect pricing/availability info #retailers will need to compete on customer experience!
@rstephens: We Agree. RT: As #mobile gives shoppers perfect pricing/availability info #retailers will need to compete on customer experience!
- On February 9th, Bloomberg broke the news that Best Buy was considering a switch to every day low prices.
Best Buy’s shift in pricing strategy from targeted promotions to everyday low prices would be intriguing. Many Cross-Channel retailers (including Best Buy) feature different pricing on-line than they do in their stores. When a shopper notices the discrepancy, most retailers will match their own lowest price, but usually at the expense of irritating their customer.
It may be a slow migration, but given the traction that mobile shopping tools are getting I now consider it inevitable that most retailers will move to universal pricing.
Is there an advantage to being a first mover?
If you know that the entire market is eventually going to move to an everyday low pricing strategy, do you want to be the first retailer in your category to own that strategy ,or do you want to be perceived as responding to your competition?
Banks found themselves in a similar circumstance in the 1990’s. In the early 90’s banks used to charge their customers when they used other banks ATM’s (so called “interchange fees”). In the mid 90’s Banks began charging an “ATM surcharge” to non-customers who used their ATMs. Essentially visiting customers were charged by both banks. But bankers realized that consumer would revolt and that the double fees would not last. Rather than waiting for the competitive pressure to force them to drop the fee, several savvy banks proactively eliminated the “interchange fee” and launched aggressive marketing campaigns promoting themselves as no-fee banks. A few years later, ATM surcharges from the out-of-network bank became the norm, but the first mover banks had several years to capture new customers.
Do retailers have a similar opportunity to earn the “everyday low price” positioning before mobile price checking becomes ubiquitous? Does Walmart already own that position? These are not easy decisions as pricing changes can we quite expensive to a major retailer. Is it better to make a number of small pricing steps (1. eliminate restocking fees, 2. move away from promotion based pricing, 3. unified cross-channel pricing), or one big one?
As for me, I’m advising clients to put universal pricing on their roadmaps.
UPDATE: Twice reports that Best Buy pricing article may be inaccurate.