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Retailers Try New Pricing Tricks to Battle Amazon on Black Friday

Posted by Yijy8kNUMO on November 20, 2017

Instead of copying Inc.’s playbook, retailers such as Wal-Mart Stores Inc. and Target Corp. are coming up with new tricks to maximize sales ahead of Black Friday.

Some are offering earlier discounts to attract crowds before competition heats up Thursday, and emphasizing products not available on Amazon. Others are rewarding their most loyal customers or marking store prices lower than those online.

Amazon was the top preference for places to begin shopping for the holidays, according to a September study of 3,785 respondents by NPD Group Inc. The findings show that shoppers are making purchases earlier in the season, and more people are feeling fatigue around holiday shopping than in past years, with 41% saying they would rather plan an outing with their family and friends than exchange gifts.

Maria Pugh of Delray Beach, Fla., said she plans to skip the rush on Black Friday and wait till Cyber Monday to buy housewares and check out deals for electronics on Amazon. “The shopping malls are too crowded,” said the 48-year-old attorney. “For me, it’s more about convenience.”

Amazon typically relies on algorithms that scrape competitors’ prices before automatically matching or narrowly undercutting them on its website. The online giant, which has long prioritized sales over profits, has recently been covering the cost of discounts on some items sold by third-party merchants. Such practices have paid off in an environment where many shoppers are constantly on their smartphones making comparisons.

“Online sales are traditionally driven by price,” said Andrew Schydlowsky, chief executive of TrackStreet, a pricing consultancy. “Retailers and brands are realizing that the race to the bottom is very dangerous and eventually destroys the value of the product.”

For the first time, Best Buy Co. offered hundreds of Black Friday deals on TVs and other devices in early November in hopes of driving sales before the competition heats up. The electronics giant has a price-matching guarantee, but the offer doesn’t apply to items on sale Thanksgiving through Monday. Toys ’R’ Us Inc., which filed for bankruptcy protection in September, also gave shoppers early access to Black Friday deals.

Target, after a weak holiday performance last year, made price cuts this year on thousands of items, including cereal, paper towels and razors. Those moves helped in the last two quarters, pushing the company back to positive sales growth.

In the months leading up to the holiday, the company has shifted away from “up and down” pricing moves, streamlining the number of promotions to focus only on “impactful” sales, said Mark Tritton, chief merchandising officer at Target, at a media event. “Instead of playing that game, we’re priced right from the very outset.”

The company has also reduced the phrases it uses for discounts from 28 last year to seven, dropping language like “weekly wow” and “as advertised.” And instead of the 10 days of deals that it has been offering around Black Friday for the past two years, Target plans to promote weekend deals throughout the season in hopes of encouraging customers to visit stores on days they are more likely to make a trip. It is also offering extra incentives to its loyalty card holders, such as early access to Black Friday promotions.

Wal-Mart, which has long emphasized an “everyday low price” message, has been experimenting with a new online system, which at times results in higher prices online than in stores for goods that would otherwise be unprofitable to ship. Some product listings on its website now indicate an “online” and “in the store” price.

The Bentonville, Ark., retailer said it would sell more exclusive products this holiday as compared with last year. Wal-Mart is offering “the absolute best prices and in deeper quantities than the competition,” said Steve Bratspies, chief merchandising officer at Wal-Mart U.S., on a call earlier this month.

 One of the biggest pricing battlegrounds starting Thursday will be Apple Inc. products. For the iPhone 8 and 8 Plus, Wal-Mart is offering a $300 gift card with purchase and activation, while Target is giving out a $250 gift card and Best Buy is offering $200 cash savings.

The Wall Street Journal is tracking online prices on several categories of holiday items to reveal how retailers compete on pricing since Oct. 1. Target has had the lowest prices for a basket of 10 popular holiday toys, including a Barbie doll, Nerf gun and Xbox videogame, on 38 of the first 47 days, according to information provided by Thinknum, a data analysis firm. But Wal-Mart dropped to the lowest price on the Saturday before Black Friday.


Source: Wall Street Journal, November 20, 2017 5:30am

Author: Khadeeja Safdar

Image Credit: Patrick T. Fallon/Bloomberg News

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