Online vs. In-store: increasing competition decreases price advantages

September 13th, 2012

Digital shopping cart Brick and mortar stores once had a clear advantage over online retailers when it came to “convenience” purchases of items costing less than $15, and higher priced items tended to be cheaper online. But a new comparison of price points between online and in-store retailers reports a “dramatic shift” from previous findings.

The fourth installment of a bi-annual pricing study (Pdf) produced by Anthem Marketing Solutions sees increased competition between brick and mortar stores and online retailers,

By comparing online and in-store prices of widely available products across a range of commonly purchased categories, Anthem discovered that online seems to have an advantage only for moderately priced goods between $15 and $45.

No advantage for either in most price ranges

For items higher and lower than that range, no clear advantage is evident for either channel.

In an interesting reversal from previous studies, offline stores no longer had a pricing advantage for convenience purchases, defined as purchases with a low ticket price and high need for immediacy.

Another difference from previous studies was identified for planned purchases, those that tend to be infrequent with a higher price tag. Right now, online retailers have an advantage for considered purchases, but Anthem says “this might not be the case much longer,” due to competitive in-store pricing.

Offline retailers successfully combating “showrooming”

Online had always had a clear price advantage in this category, which has now disappeared. This substantiates the efforts offline retailers are making to counter the ‘showrooming’ trend in which consumers use their mobile phones while in-store to find better pricing online.

The report notes that while Amazon has been encouraging “showrooming” via a price-checking phone app, some manufacturers, such as Adidas, Nike, and Asics have said they will pull their products from Amazon and eBay to keep lower online prices from devaluing their brand. Others, such as Best Buy, replace standard bar codes with those that can’t be scanned for comparison purposes.

There are categories in which either in-store or online has advantages, however. Anthem’s researchers say entertainment products have an online advantage, while consumables are cheaper in-store.

Low shipping rates still a draw

Realizing product pricing was not the only factor affecting consumer purchase decisions, Anthem decided to also discuss the implications of shipping costs. Shipping costs remain an important factor in the minds of the consumer for free shipping would entice the majority of consumers to increase basket size.

Some studies suggest that free shipping can entice 93 percent of online customers to add items to their cart.