Targeting One’s Competitors: The Use of Price Matching Policies to Combat “Showrooming”

Last August, we addressed the phenomenon known as “showrooming” experienced by owners of bricks and mortar stores, whereby customers evaluate products in the stores but ultimately buy the product from a different online retailer at a lower price. On January 9, 2013, Target announced a new price match policy, which extended a holiday-season promotion designed to reduce showrooming at Target stores. Notably, Target’s policy extends to prices offered by a specific list of online retailers. Subject to certain conditions and limitations, if the exact item a customer purchased at a Target store can be found at Target.com, Amazon.com, Walmart.com, BestBuy.com, ToysRUs.com, BabiesRUs.com or in a competitor’s local printed advertisement within seven days of the purchase, Target will refund the difference. So far, no other major retailers have followed suit, though Best Buy ran a similar promotion for the 2012 holiday season.

There was some initial speculation that Target’s online price match policy could make a dent in customers using Target stores as showrooms for subsequent online purchases. However, an examination of the policy conditions and exclusions reveal that the policy is a fairly weak tool to fight showrooming. While it is possible for a customer to receive the benefit of a price discrepancy at the time of purchase, he or she must present evidence of the better price and go through the price match process at guest services instead of a regular checkout station. Further, if a customer is not aware of the price difference at the time of purchase, a customer must visit the store twice within seven days to take advantage of the program. Also, there are multiple exclusions. First, the product must be identical to the one purchased at a Target in every way, including “brand name, size, weight, color, quantity and model number,” and the price and product offered by the competitor must be in effect and in stock when the customer requests the price match. Second, there are exclusions that eliminate the potential for significant price discrepancies that would incentivize customers to undergo the price match process (such as excluding “buy one, get one” promotions; limited time, supply or quantity offers; clearance or closeout sales; and prices advertised as a percent or dollar off).

It may be that to use price matching to really battle showrooming, bricks and mortar stores like Target will have to relieve the customer from many of the burdens identified above. For example, if checkout scanners were able to make automatic comparisons to prices offered by certain online retailers for the identical product, price matching policies might tempt customers to make their purchases in the “showroom.” As for Target’s policy, it remains to be seen whether it will have much effect on showrooming, but there is reason to be skeptical.

Related topics: Retail, Retail Sales