How I Saved 50 Percent by Using Kmart as Its Own Showroom
Last weekend, I decided to head down to my local Kmart (SHLD) to buy a new slow cooker so that I could make some chili. I found a Hamilton Beach model that looked good, but it was a bit on the pricey side (relatively speaking), with a sticker price of $34.49. So like any savvy shopper, I used one of the barcode-scanning apps on my smartphone (in this case, eBay's RedLaser) to see if I could find a lower price on, say, Walmart.com (WMT) or Amazon (AMZN).
But the lowest price wasn't to be found on either site. Instead, I found it for just $17.99 -- nearly 50% lower than the price I was looking at in the store -- on Kmart's own website.
I wasn't sure if Kmart had a policy of price-matching its own website, and I wasn't about to hold up a line of shoppers while I debated the point with a cashier. So I sat down at a nearby dining room display and bought the slow cooker from Kmart's mobile site, selecting the store-pickup option. An hour later, while running other errands in the neighborhood, I received an email alerting me that my order was ready, and returned to the store to retrieve it from the layaway counter.
Self-Showrooming
There's been a lot of talk about the growing trend of showrooming -- shoppers going to a retail location to browse and try out the products they are considering, then going online to buy those products at lower prices. Usually, these shoppers are equipped with smartphones, which they can use to scan bar codes and instantly find the best deals.
In general, customers who showroom at a bricks-and-mortar retailer subsequently make their purchases at online operations like Amazon. We recently asked Harris Interactive to include a question about showrooming in its weekly consumer survey, and the results showed exactly that: Those who admitted to showrooming said they usually do it at stores like Best Buy (BBY) and Walmart, and 57% said they ultimately made their purchase at Amazon.
My scenario was different: I ended up using Kmart as its own showroom. I got the in-store experience of being able to check out the selection of slow cookers in person, combined with the low price of online shopping. And by opting for in-store pickup, I was able to bypass any shipping fees, and didn't have to wait several days for my purchase, so I could cook my chili that evening.
But the experience left me confused. It's easy to understand how Amazon can offer lower prices than a bricks-and-mortar operation that has higher overhead costs. But why should a product sold by the same company cost so much less when purchased from its website than its stores?
Be Consistent
It really shouldn't, says Greg Girard, a retail analyst for IDC who has studied showrooming and retailer omnichannel strategies.
"You should end up with consistent prices, if in fact that's their strategy," he says. "Unless you recognize that customer, you want to present the same price."
Since they didn't know me (I wasn't logged into a Kmart account), Girard proposes a number of possible reasons why I would find such a different price online: different inventory levels between channels; sluggishness by the store in synchronizing its pricing with the corporate website; or regional pricing variations, which may be particularly pronounced in a place like Manhattan.
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Whatever the case, Girard says the steep price difference I encountered is something retailers should endeavor to avoid. When the customer successfully gets the lower price, Kmart loses margin on the sale, and the shopper is more likely to showroom the next time he's in the store. Conversely, if the customer finds out after the fact that he could have gotten a better price, he'll be angry and less likely to shop at that store in the future.
"You either lose margin or you lose customer loyalty," he says. "Inconsistent pricing was an issue before showrooming, and showrooming is making it worse."
A Kmart spokesman I talked to did acknowledge some degree of regional price variation, and noted that Kmart is running some online-only sales for the holiday season. But he also insisted that the price differential I observed in the store wasn't as great as it appeared -- that the product had, in fact, been marked down to $19.99 and would have rung up at that price if I'd brought it to the checkout counter. Still, I confirmed the sticker price on one of the store's own bar code scanners, so either the scanner was faulty or the store simply hadn't changed the price in its local system yet.
You Win the Match Game
Regardless of what was actually going on with the item's pricing, it turns out I didn't need to make the purchase on my smartphone. Sears Holdings' corporate policy allows in-store shoppers to price-match any item they find cheaper on the websites of Kmart, Sears or Land's End. As such, the company says, any cashier would have been able to give me the lower price if I'd presented it on my phone at checkout.
That's a good example of the seamless approach that retailers are using to retain connected customers who might otherwise take their business to the lowest bidder. A more extreme approach can be found at Best Buy and Target, both of which are offering to match prices from online competitors during the holiday season.
Whatever the implications for Kmart, the experience confirmed something I already knew: If you use the price-comparison tools at your disposal, you're usually going to wind up saving money -- regardless of who gets the sale.
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Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
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