How Retailers Should Think About Online Versus In-Store Pricing

One of the biggest questions faced by brick-and-mortar retailers today is whether prices should be the same online and in stores. Gaining clarity on this issue is critical for traditional retailers to successfully compete in both environments. Brick-and-mortar retailers have been struggling with pricing since Amazon’s inception, 23 years ago, so why is it so important to resolve this issue now? Well, the news for retailers keeps getting worse. Macy’s and Kohl’s both reported 2.1% declines in comparable store sales in November and December, resulting in 10% and 15% stock price drops, respectively. The Limited shuttered its stores and is now focusing exclusively on e-commerce. It’s clear that an increasing number of customers don’t value the experience of shopping in physical stores. Brick-and-mortar retailers have a strategy problem. To avoid going the way of milkmen, they have to continue to: ramp up web operations; create new reasons — and value — for consumers to patronize stores; and limit physical locations to areas with populations dense enough to support stores. Solving these problems will take time. But in the near term, rethinking pricing strategies can keep retailers afloat. The beauty of focusing on pricing is its immediate effect: Prices can be changed on Sunday evening, and new profits start rolling in on Monday morning. Read more at Harvard Business Review.