Dynamic Pricing in a Smartphone World: A Shopper Showrooming Study

DYNAMIC PRICING IN A SMARTPHONE WORLDA SHOPPER SHOWROOMING STUDY JULY 2013

CONTENTS

introduction 3

methodology 5

key discoveries 6

compare and buy from e-competitors 7

Amazon is #1 8

price is king 9

showrooming price elasticity 10

traditional retailers can beat Amazon 11

key insights by income 12

a shopper showrooming study by parago 2dynamic pricing in a smartphone world

AMAZON IS WINNING THE WAR IN-STORE


Sophisticated e-tailers are using dynamic pricing models, which are real-time price adjustments based on market demands, consumer behaviors, competitive insights and other data centric factors, coupled with the explosion of smartphones to steal customers while they are shopping in store.We found in this study that showrooming, the practice of comparison shopping on a smartphone while in-store, is up 400% over last year. Amazon is the #1 way US consumers compare prices on their smartphones at physical stores. Not only is Amazon #1, but it is used for showrooming 2x more than the next option, Google.

Showrooming is occurring substantially across all income levels and retail categories, even those often assumed immune from it, such as auto parts. Additionally, a price difference of just $5 in many cases can sway the purchase decision to Amazon.

56% of adults 18+ now have a smartphone, according to the Pew Internet Study conducted in May 2013. Our study finds 58% regularly showroom and buy e-tailer products while in brick-and-mortar stores from their smartphones or go home and buy them online.

That means at this moment, 1/3 of all adult shoppers regularly showroom. They’re choosing competitors’ products on their smartphones while in-store. The numbers are quickly growing as smartphone penetration continues its steady rise.

Customer shopping behaviors have fundamentally changed. The combination of smartphone use and savvy e-tailer tactics is enabling customers to work around these traditional retail strategies: special sales, exclusive merchandise, unique SKU numbers, and one-of-a-kind experiences and services.

That’s because consumers are being trained to look past exclusivity and service by e-tailers that have the ability to offer similar items at a much better prices with personalized service and experience that most consumers rate as good as brick-and-mortar stores.

Some good news for brick-and-mortar retailers: a silver lining was uncovered in this study. The findings clearly show when a retailer matches e-tailer prices with rebates, which provide healthier margins than instant discounts, the majority of consumers will shop and buy from the store more often, across all incomes levels and retail categories.

The results of this national study will profoundly change your understanding of the market. Dynamic pricing models, designed to steal traditional shoppers on their phones while they are in-store, are getting smarter every day.

Retailers that acknowledge the reality of the situation and find strategies both in-store and online — such as dynamic price match rebates — will be the ones best prepared to win in the long run.

We invite you to join us in the discussion. Please share your thoughts, insights and questions as we continue to closely monitor in real-time the most dynamic shift in retail that has ever occurred. Good shopping!

Rodney Mason, CMO [email protected] 972.538.7336 http://twitter.com/rodmoose

INTRODUCTION

OUR STUDY UNCOVERS HOW RETAILERS CAN BEAT AMAZON


mailto:[email protected]

http://twitter.com/rodmoose

METHODOLOGY

annual household income

$200,000+ 5%

$100,000–$199,000 17%

$50,000–$99,999 39%

$20,000–$49,999 28%

< $19,999 9%

did not disclose 3%

geographic region

New England 5%

Mid-Atlantic 17%

East North Central 15%

West North Central 5%

South Atlantic 22%

East South Central 4%

West South Central 9%

Mountain 5%

Pacific 20%

employment status

employed full time 39%

employed part time 36%

not employed, looking for work 7%

not employed, not looking for work 9%

retired 4%

disabled/not able to work 5%

marital status

married 59%

widowed 2%

divorced 9%

separated 2%

never married 28%

age

18–22 5%

23–29 18%

30–39 32%

40–49 22%

50–59 16%

60+ 7%

educational background

less than high school 1%

high school diploma 14%

some college 25%

associates degree 15%

bachelors degree 32%

graduate degree 13%

objective

Determine how frequently customers showroom, buy from e-competitors on their smartphones, and the price differences that sway them to do so.

gender

53% female47% male

housing situation

66% own34% rent

respondents

1,043 smartphone owners surveyed via a national, online study conducted in June 2013.


KEY DISCOVERIES


Most smartphone owners showroom regularly in

every major shopping category, including automotive and hardware

Customers will shop and buy more often from a store that matches online competitors’ prices with rebates

Price is the most important smartphone research factor, but customer reviews also rank high

56% of smartphone owners shop in stores and regularly buy competitive products on smartphones while there

Amazon is the #1 way customers compare prices on their smartphones—

2x more than Google

$5 price difference on a $50 product tips the scales in Amazon’s favor$

58% of smartphone owners shop in brick-and-mortar stores and regularly compare price on their smartphones while in store and then decide to buy online later

COMPARE AND BUY FROM E-COMPETITORS

sometimes neveroften

26% weekly 32% monthly 36% a few times a year 6% never

Showroomers who regularly buy an item online (not on a smartphone) after comparing prices in-store

of smartphone owners use their phones to compare

prices while in-store

58%

8% compare prices a few times a year

26% compare prices monthly

66% compare

prices weekly Retail categories in which customers regularly

check out items in-store, but buy online

50% 47%

apparel

20% 47%

automotive

50% 46%

electronics & mobile technology

42% 51%

housewares

31% 58%

appliances

30% 45%

building tools & supplies

54% 40%

entertainment

39% 50%

office supplies

58%

56%

41%

$100

$50

$20

of shoppers compare

prices in every product

range, no matter how small

23% compare prices on items over $20



of these shoppers

Showroomers who regularly buy an item on their smartphones while comparing prices in-store

29% weekly 27% monthly 24% a few times a year20% never


AMAZON IS #1

Amazon is the number-one way consumers compare prices on their smartphones

50%

50% of male respondents

61%

61% of households with $100,000–$199,999

annual incomes

42%

42% of female respondents

76%

76% of households with $200,000+ annual incomes

46% are Amazon Prime members with special perks, including free shipping

most freqently moderately

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

most 26% 28% 24% 24% 39%

frequently 51% 36% 35% 41% 18%

moderately 16% 19% 36% 20% 23%

total 93% 83% 95% 85% 80%

Google price comparison use by household income

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

most 71% 64% 56% 50% 50%

frequently 20% 23% 28% 22% 16%

moderately 4% 7% 10% 17% 14%

total 95% 94% 94% 89% 80%

Amazon price comparison use by household income

Amazon

Google

apps

customer ratings

comparison websites

social media

92%

84%

75%

78%

77%

55%

total

56% 12%24%

26% 22%36%

18% 22%35%

15% 24%39%

13% 27%37%

11% 21%23%


PRICE IS KING

1 2 3 4 5

best price 46% 17% 13% 20% 4%

customer reviews 28% 30% 24% 14% 4%

expert reviews 13% 22% 27% 29% 8%

product information 11% 23% 17% 20% 29%

social media peer comments 3% 8% 19% 17% 54%

Most important factors when comparing products in-store on smartphones (1 = most important; 5 = least important)

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

best price 31% 43% 51% 47% 39%

customer reviews 28% 36% 26% 27% 24%

expert reviews 29% 13% 11% 10% 22%

product information 10% 7% 11% 13% 10%

social media peer comments 2% 2% 2% 3% 4%

Most important smartphone comparison factors by household income

CUSTOMER REVIEWS

28%

EXPERT REVIEWS

13%PRODUCT

INFORMATION

11%SOCIAL MEDIA PEER COMMENTS3%

PRICE IS KING for comparison shopping on smartphones while in-store

But CUSTOMER COMMENTS are also very important

SOCIAL is not significant for mobile search, but it can be a good tool to elevate customer comments and price messaging through search

PRICE 46%


SHOWROOMING PRICE ELASTICITY

would buy from Amazon if a $50 item in store were

$45 on Amazon


$40 on Amazon


$90 on Amazon


$80 on Amazon

A $5 difference tips the scale for Amazon

63% 82% 76% 91%

$5

A 5% discount on an item $500+ that is not an exact match, but is similar, can switch half of all shoppers to Amazon

50% would buy from Amazon when price in

store is $500 and not an exact match is $475 on Amazon savings = 5% / $25


store is $500 and not an exact match is $450 on Amazon savings = 10% / $50


store is $500 and not an exact match is $425 on Amazon savings 15% / $75

The higher the ticket price, the greater the propensity to jump to Amazon for a similar item that is not an exact match

79% would buy from Amazon when the price

in store is $100 and an item that is not an exact match is $80 on Amazon savings = 20% / $20


in store is $100 and not an exact match is $90 on Amazon savings = 10% / $10


in store is $50 and not an exact match is $40 on Amazon savings = 20% / $10

Amazon

in-store


MATCHING REBATE PREFERRED OVER AMAZON

The majority of customers will shop and buy more often at stores that have Amazon price-match rebate guarantees

TRADITIONAL RETAILERS CAN BEAT AMAZON

Consumer propensity to visit and buy more by retail category, when the retailer offers an in-store rebate that matches an online price

visit more

buy more

apparel 56% 51%

appliances 48% 50%

automotive 42% 42%

building tools & supplies 40% 43%

electronics & mobile

technology52% 55%

visit more

buy more

entertainment 50% 48%

furniture 45% 45%

housewares 47% 48%

office supplies 46% 47%

toys 43% 40%


67%

$40 on Amazon $50 – $10 rebate

in-store

65%


in-store

will buy at store over Amazon(female: 69% / male: 61%)


63%


in-store


62%


in-store


KEY INSIGHTS BY INCOME

59% of households with $200,000+ annual incomes

buy on their phones weekly while in-store

All income levels up to $200,000 buy on their smartphones while in-store as much or more than on computers or other devices

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

every week 59% 30% 26% 27% 33%

at least once per month 14% 31% 28% 28% 22%

a few times per year 24% 21% 27% 24% 19%

How often do you visit a store to check out a product and buy it on a smartphone while you’re there?

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

every week 65% 27% 26% 24% 31%

at least once per month 12% 34% 32% 34% 21%

a few times per year 20% 35% 38% 38% 34%

How often do you visit a store to check out a product and buy it online (but not on a smartphone) instead?


$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

SAVE $10 on a $50 item 61% 49% 44% 45% 49%

$20 on a $50 item 68% 53% 50% 52% 51%

$20 on a $100 item 50% 59% 62% 60% 51%

$25 on a $500 item 49% 50% 49% 53% 44%

$50 on a $500 item 71% 72% 73% 76% 60%

$75 on a $500 item 82% 85% 87% 86% 51%


$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

SAVE $5 on a $50 item 73% 66% 62% 62% 51%

$10 on a $100 item 82% 79% 75% 76% 69%

$50 on a $500 item 82% 85% 84% 86% 74%

The higher the income, the greater the propensity to switch to Amazon to save $5 on a $50 item

Switch to Amazon to save on a similar item, even though it’s not an exact match

$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

SAVE $10 on a $50 item 57% 64% 68% 70% 63%

$25 on a $100 item 63% 63% 67% 65% 66%

$50 on a $200 item 55% 57% 64% 65% 69%

$100 on a $500 item 61% 55% 62% 64% 67%

Will buy from a brick-and-mortar store with the following Amazon price-match rebate savings

The majority of customers will shop and buy more at stores with Amazon price-match rebate guarantees



$200,000+ $100,000–$199,000

$50,000–$99,999

$20,000–$49,999 < $19,999

visit more

buy more

visit more

buy more

visit more

buy more

visit more

buy more

visit more

buy more

apparel 59% 47% 55% 60% 57% 50% 57% 51% 57% 49%

appliances 51% 49% 46% 56% 48% 51% 52% 47% 46% 41%

automotive 43% 47% 43% 47% 44% 45% 43% 39% 38% 32%

building tools & supplies 39% 49% 38% 49% 41% 43% 43% 42% 38% 23%

electronics & mobile

technology57% 47% 53% 60% 54% 56% 51% 56% 56% 39%

entertainment 55% 37% 48% 55% 49% 46% 51% 48% 52% 41%

furniture 33% 57% 48% 49% 46% 47% 46% 42% 44% 32%

housewares 51% 47% 42% 55% 48% 47% 45% 48% 59% 39%

office supplies 53% 47% 49% 54% 45% 46% 44% 47% 44% 47%

toys 63% 37% 45% 43% 42% 41% 43% 39% 41% 38%

Propensity to visit and buy more by retail category, when retailer matches online price with a rebate


CONTACT

Rodney Mason

Chief Marketing Officer [email protected] 972.538.7336

www.parago.com

parago creates engaging solutions that inspire actions & impact results. As the most comprehensive single-source provider for incentives and engagement,

we deliver $2 billion in rewards to 50 million people worldwide each year with advanced technology. Our relentless focus on innovation drives better results, making us the smart choice.

consumer rebates & promotions | employee rewards & recognition | sales & channel management

© 2013 parago, inc. All rights reserved.

mailto:[email protected]

www.parago.com

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Dynamic Pricing in a Smartphone World: A Shopper Showrooming Study