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Friday, January 23, 2015

Lowest Online Price: Amazon, Best Buy, Target or Walmart?

"Where can I get the lowest price?" should be an easy question to answer. But it's not.

Thanks to a slew of factors ranging from shipping fees, special offers linked to credit cards and price-matching guarantees, it can be difficult for shoppers to find the best possible price on an item. Making things even more complicated are retailers' sophisticated algorithms, which respond to changes in the marketplace and sometimes adjust prices more than once a day.

Excluding these complexities, CNBC teamed up with personal finance website NerdWallet to track base prices on 11 consumer electronics products over 12 consecutive weeks at Target.com, BestBuy.com, Amazon.com and Walmart.com.

For the purposes of the study, which was conducted using NerdWallet's DealFinder tool, the base price was only adjusted when the retailer offered a gift card with the purchase. Products examined included a Fitbit Flex, Sony PlayStation 4 and a 16-gigabyte Apple iPad Air. Prices for the last one is charted below.


According to the findings, Amazon ruled the pricing jungle, with Walmart coming in a close second. In some cases, Amazon noted that its price advantage came from its third-party seller marketplace, where it does not influence pricing. Target and Best Buy most often tied for the highest online prices.

Price-Match Guarantees

NerdWallet senior retail analyst Matt Ong said that Amazon and Walmart have the most advanced pricing software algorithms and that "It looks as if Target is either choosing not to play the [pricing] game, or is just not as advanced in its [pricing] technology."

In response to the study's findings, spokespersons for Target, Best Buy and Walmart all pointed to their price-match guarantees. Rafi Mohammed, founder of pricing strategy consulting firm Culture of Profit, said price-sensitive consumers can almost always get the best price at any retailer by taking advantage of price-match policies available-so long as they're willing to invest the time.

A separate finding from the CNBC/NerdWallet study found Best Buy had the top track record for being in stock. Only one of the items included in the study was out of stock one time during the 12-week tracking period.

Thursday, January 22, 2015

Shoppers Demand More From Their Online Shopping

"That's all your house is: a place to keep your stuff while you go out and get more stuff!" -- George Carlin

Consuming goods. Buying stuff. In a word: shopping. Myrtle Beach-based advertising agency The Brandon Agency has called it "America's new favorite pastime." (The "new" part is debatable, but "favorite"? Definitely!) And yet, for many of us, there's a big problem with the shopping experience -- and it's the subject of a new poll out of Gallup.

Polling some 12,055 adults nationwide last Christmas shopping season, Gallup discovered that about 1 in 3 (35 percent) of us are doing more of our shopping online than we did a year ago. But the more "stuff" we buy online, the less satisfied we become with the shopping experience.

This is contrary to what you might expect -- that familiarity with a store's website layout, and the ability to save a shipping address and credit card number for later use, would ease future transactions and make for a smoother and smoother shopping experience the more times a shopper visits a site. In fact, the opposite seems true. Familiarity with a website instead breeds contempt!

The Numbers

Comparing two sets of shoppers, one comprised of "retail customers overall" (online and offline) and a second group that shops online more often than the norm, Gallup found that the second group is 1 percentage point less "fully engaged" with a retail brand -- and could be as much as 7 percentage points more "actively disengaged."

This suggests that even if a shopper likes a particular brand in theory, exposure to the online shopping experience is unlikely to make said shopper like the brand any more. But it could well make the shopper like the brand less.

That's how much shoppers dislike the online shopping experience.

What Companies Want

Why is this important to the companies selling the brands to the consumers? In a nutshell, because "fully engaged" shoppers are much more profitable to a company than run-of-the-mill customers. Shoppers who have a "strong, positive emotional attachment to a company" (i.e., are "fully engaged") tend to spend more on, and produce more profits for, that company. (About 24 percent more, according to Gallup.)

That alone argues in favor of a company making an extra effort to engage its customers. But how?

What Shoppers Want

Curiously, the answer isn't that companies should offer to sell more "stuff" to consumers, or even sell them better stuff. Rather, Gallup's research shows that "service is more important to customers than products."

View all Courses In particular, Gallup notes that the customers it's talked to demand "the same type of personal, convenient service they receive at a storefront" when shopping online. That's not easy to accomplish in a remote shopping transaction, but Gallup says that by offering "live chat sessions with company representatives" and "personalized recommendations" of things to buy, an online store can better mimic the storefront experience.

The demand for the same service both online and offline also suggests companies should make an effort to "align online and storefront channels." Says Gallup, "retailers must deliver a seamless online and in-person experience." Otherwise, if a company offers one line of products online, for example, and another in store (or one level of service online, and something better in store), a customer might see no reason to patronize the company's online business at all. Customers might instead choose a consistently reliable service such as Amazon.com (AMZN) whenever shopping online.

But what's the No. 1 most important thing a store can do to improve the online shopping experience, and win shopper loyalty online? Gallup data shows that "problem resolution" is absolutely key. It seems that, even 15 years into the new millennium, shoppers are still deathly afraid of buying stuff online only to find they don't like it and have to figure out how to return it (or fear they'll never get it at all).

Turns out, smoothing over delivery problems, and making online shopping as easy and hassle-free as in-store shopping, is perhaps the single most important thing a company can do to ensure its brand value doesn't suffer from the online experience. What's more, says Gallup, "Retailers that perfect their customer service gain a significant competitive advantage over retailers who focus most of their efforts on delivering the latest and greatest products."

Better service, better profits. It's really as simple as that.

While generally in agreement with Gallup's findings, Motley Fool contributor Rich Smith thinks Gallup might have missed a couple of points for improvement. Namely, more free shipping -- and free shipping on product returns, too. He has no position in any stocks mentioned, but The Motley Fool recommends and owns shares of Amazon.com.

Thursday, January 15, 2015

Discounts Have Cost E-Commerce Websites Around Rs. 1,000 Crore in Losses: PwC

E-commerce companies have incurred combined losses of around Rs. 1,000 crore due to heavy discounting strategy and this model is not feasible in the long run, a PwC report said.
"Offering lower prices will not be viable in the long term. Despite luring in customers in the initial stages, lower prices won't be able to retain customers in the long run.

While the discounting will continue for some more months, e-tailers are thinking beyond discounts to acquire customers and build loyalty," the report said.

The combined losses faced by e-tailing companies as a result of their discounting strategies now stand at almost Rs. 1,000 crore, the report said without giving the time frame for these losses.

Out of a total of 1,005 respondents surveyed as part of the PwC study from India, almost half the respondents said they preffered to shop online due to better deals and discounts offered by these retailers.

"A majority of e-commerce players are start-ups and, therefore, are working towards rapidly scaling up their market share. They have been aggressively planning and implementing discounting strategies, which would make the customer sit up and take notice," it said.

Pointing out that price has emerged as the biggest differentiator driving consumers to shop online or in-store, it said the customer habits have changed, as they are used to discounts throughout the year.

The PwC report said the 'predatory' pricing strategy of e-commerce companies isn't helping their stand with the premium brands.

It found that with valuations of e-commerce companies skyrocketing, there is increasing pressure from investor firms to cut down on discounts and concentrate on making profits.

Thursday, January 8, 2015

Online Sales of Consumer Goods and Retail in India to Grow 40 Percent: Report

The Indian consumer goods and retail industry is estimated to witness its online sales growing by 40 percent till 2019, which is the fastest among the emerging markets, while store-based sales will grow by just 10 percent, according to a report.
As per the report by EY and the Consumer Goods Forum on global consumer goods and retail omni-channel supply chain, online sales to be witnessed in Indian consumer goods and retail industry will be the second fastest globally after Nigeria at 79 percent.

In India, growth in store-based sales is expected to be at 10 percent, vis-a-vis 40 percent growth in Internet sales, the report said.

During 2014-19 period, global online sales for the consumer goods and retail industry would grow by 15 percent, while the traditional set up would have a growth of 5 percent only.

"In emerging markets, the gap between store-based and online growth will be even greater," the report added.

In the emerging markets category, India is followed by its arch-rival China with an expected online sales growth of 21 percent and 8 per ent from traditional establishments during the period.

Highlighting the need to build a more responsive, integrated supply chain and improve consumer visibility, the report said omni-channel is fast becoming the key driver for consumer products and retail sector growth, but few can make it profitable using the traditional supply chain.

Commenting on the findings, EY's Global Supply Chain and Operations Leader Andrew Caveney said: "Reengineering the omni-channel supply chain must be a priority for consumer goods companies and retailers if they are going to remain relevant to both the consumer and their shareholders."

Interestingly, online sales growth in developed markets like the US and the UK are estimated to be only 12 percent, which are below than the global average of 15 percent.

Similarly, France and Germany would have 13 percent and 14 percent online growth, respectively, for consumer goods and retail industry.

As for store-based sales growth, France and the UK would have a growth of 2 percent, Germany and the US at 3 percent and 4 percent, respectively, during 2014-19, which is again below than global average of 5 percent.