Commentary

It's Beginning To Look Like An Appy Holiday

Target has become the latest big-box retailer to say it would match competitor’s prices -- a trend gathering momentum that may deliver a few unwanted consequences, Ann Zimmerman reports in this morning’s Wall Street Journal.

For one thing, all those folks “scurrying to the Internet” to prove to a cashier that they found “the gum is 12 cents less at Amazon,” as CFI Group CEO Sheri Petras puts it, is not going to sit well with the folks in line behind them who are tapping their feet while clutching, say, various shades of high-tech Furbies (which, depending on the shade, are available at various price points at Amazon). 

And that all that foot tapping is likely to turn to cacophonous foot stomping if the cashier at, say, Best Buy decides that the price on that Motorola Droid Razr Maxx, for example, is too low to match after all. (Can you imagine all the back-and-forth if various carrier’s plans enter into the picture?)

“Best Buy said its staff must verify on a store computer that the rival's price is actually lower at that moment and that the product is readily available,” Zimmerman reports. “And a salesperson or manager can refuse to match a price if they deem it too low,” according to a Best Buy spokeswoman.

Of course, there’s the matter of margin –- which averaged a mere 6.1% at retailers last holiday season, according to Wedbush Securities analyst Michael Pachter. And an analysis by William Blair & Co. recently found that Amazon’s prices were lower, on average, by considerably more than that -- 14% at Target, 16% at Best Buy and 9% at Wal-Mart (which has yet to jump into the price-match fray).

Target announced its price-matching program on Tuesday, Natalie Zmuda reports in Ad Age, as part of of an “aggressive” holiday strategy that touches “on both the emotion of gift giving as well as competitive promotions.” An ad campaign from 72andSunny with the theme “Dream Big. Save Bigger” sets the tone and a spot that broke last week “lays the theme,” according to new CMO Jeff Jones.

Yes, that’s right, a spot with snow, waving neon Santas and colorfully wrapped boxes broke in the middle of October. 

“We think about our strategy in terms of those people who earlier and earlier are planning for the holidays," Jones tells Zmuda. "There's no magic on what the right start date is." 

In years past, however, Target pretty much hewed to the formerly magic start date of after Thanksgiving, Zmuda reports. 

The Target price-matching program now starts Nov. 1 and runs to Dec. 16, as Tiffany Hsu reports in the Los Angeles Times, with prices on in-store items matching those offered online at Amazon, Wal-Mart, Best Buy and Toys R Us. It also “will extend the same policy for products in its stores available for less on Target.com or in printed advertisements from local competitors” through Dec. 24. 

The hed on Hsu’s story warns Amazon to “Watch Your Back,” but a Topeka Capital analyst who visited Best Buy, Target, Walmart, Staples, and Toys R Us armed with Amazon’s Price Check app found that “most of the products scanned came up with lower prices on Amazon, with 100% of electronics and toys costing less online than at any of the retailers,” The Consumerist’s Chris Morran reports.

Target and Wal-Mart employees evidently weren’t fazed by the results but “the crew in blue at Best Buy … ‘were less enthused about the ability of their firm to survive the impact from Amazon,’” according to the report –- perhaps in anticipation of all that foot stomping.

Although Target’s announcement was “an obvious shot across the bow of Amazon,” as Teresa Rivas observes in Barron’s “Tech Trader Daily” blog, Piper Jaffray’s Gene Munster is one analyst who doesn’t see the Good Ship Bezos actually taking a hit.

“In the end, we believe the overall matching process could prove frustrating for customers and is unlikely to cause a slowdown in the shift from off line to online sales,” Munster writes.

Jacob Wolinsky goes even further in a ValueWalk piece that also pulls from Munster’s observations and Topeka Capital’s Victor Anthony’s field report. The hed concludes: “Amazon Is Crushing Best Buy and Matching Prices Will Not Help.” 

Appy Holidays, consumers!

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