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
a shopper showrooming study by parago 3dynamic pricing in a smartphone world
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
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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.
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KEY DISCOVERIES
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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
21% compare prices on items over $50
14% compare prices on items over $100
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
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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
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%
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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%
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SHOWROOMING PRICE ELASTICITY
would buy from Amazon if a $50 item in store were
$45 on Amazon
would buy from Amazon if a $50 item in store were
$40 on Amazon
would buy from Amazon if a $100 item in store were
$90 on Amazon
would buy from Amazon if a $100 item in store were
$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
78% would buy from Amazon when price in
store is $500 and not an exact match is $450 on Amazon savings = 10% / $50
88% would buy from Amazon when price in
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
55% would buy from Amazon when the price
in store is $100 and not an exact match is $90 on Amazon savings = 10% / $10
54% would buy from Amazon when the price
in store is $50 and not an exact match is $40 on Amazon savings = 20% / $10
Amazon
in-store
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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%
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67%
$40 on Amazon $50 – $10 rebate
in-store
65%
$75 on Amazon $100 – $25 rebate
in-store
will buy at store over Amazon(female: 69% / male: 61%)
will buy at store over Amazon(female: 71% / male: 62%)
63%
$200 on Amazon $250 – $50 rebate
in-store
will buy at store over Amazon(female: 67% / male: 58%)
62%
$400 on Amazon $500 – $100 rebate
in-store
will buy at store over Amazon(female: 65% / male: 58%)
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?
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$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%
KEY INSIGHTS BY INCOME
$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
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KEY INSIGHTS BY INCOME
$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
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CONTACT
Rodney Mason
Chief Marketing Officer [email protected] 972.538.7336
www.parago.com
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