News • 03.02.2017

Online retail prices often match those in stores

Study shows online retail prices often match store prices - and suggests why they sometimes do not

Photo: Online retail prices often match those in stores...
Source: panthermedia.net/sensay

When you buy products online, do you imagine you could get better prices in a store? Conversely, does in-store shopping lead you to wonder whether you are missing better prices online? Fear not.

An innovative study by an MIT economist shows that in 10 major countries, companies sell their wares at the same prices in stores and online, at the same moments, nearly three-quarters of the time.

"We were a bit surprised by the numbers," says Alberto Cavallo, the Douglas Drane Professor in Information Technology and Management at the MIT Sloan School of Management and author of a newly published paper on the subject. In his view, the level prices have a lot to do with companies wanting to seem "fair" to as many consumers as possible.

"It has a lot to do with experience," Cavallo adds. "I think what is driving much of this is consumers don't think it's fair when they see a different price online."

Online shopping accounted for fewer than 10 percent of all retail transactions in the U.S. as of 2014, and researchers are still examining many of the shifting contours of online retail.

Cavallo's study also contains other revealing data about the dynamics of online prices, including an explanation for some of the discrepancies in offline and online prices that exist among retail sectors.

Where in-store prices tend to diverge from online prices, it is often in business sectors with a premium on immediate convenience, including drug stores. If you need an item within an hour or two -- some aspirin or band-aids, for instance -- you are more likely to pay more in person.

On the other hand, retailers in electronics or apparel, whose products are often associated with less urgency, tended to have in-store and online prices that matched more closely.

The paper, "Are Offline and Online Prices Similar? Evidence from Large Multi-Channel Retailers," appears in the January issue of the American Economic Review.

The cost of convenience

Cavallo's paper grew out of MIT's Billion Prices Project, an ongoing effort to track online prices, founded in 2008. To conduct the study, Cavallo recruited 323 workers to scan prices from stores in 10 countries, and compared these prices to the online data available for the same products, at the same time, from the same retailers.

All told, the study examined about 38,000 prices for roughly 24,000 products in those 10 countries, from December 2014 through March 2016. On aggregate, prices were the same 72 percent of the time.

In the U.S., products had the same prices about 69 percent of the time; that figure was as low as 42 percent in Brazil and as high as 91 percent in Britain.

Those numbers help bring clarity to a matter where subjective impressions can vary widely -- although with good reason, perhaps.

"If you ask someone are the prices you get online the same as what you get in the store, they have different views, depending on where they shop or live," Cavallo says.

The study shows that apparel prices are the same, online and in stores, about 92 percent of the time; for electronics, that figure is 83 percent. But for drugstores, prices are identical just 38 percent of the time.

Cavallo thinks the differences among sectors "make intuitive sense. In electronics and apparel, the online and offline markets are very integrated and people are used to doing some research online even if they're going to buy offline."

By contrast, he says, "Now you go to a drugstore. There we found that in-store prices are higher. It makes sense. When you go to CVS or Walgreens, you need the product immediately, and you are willing to pay for that convenience."

Office supply stores had an even lower convergence of prices, which were identical just 25 percent of the time, although a ready explanation for that is not at hand. As Cavallo notes in the paper, office-supply prices "are sometimes higher and sometimes lower online, without any clear patterns."

Winners and losers

Economists who have read the paper say it is a valuable addition to the literature about online prices.

For his part, Cavallo recognizes that there is considerable room for more research about online prices and suggests it would be valuable to conduct this kind of study at different points in time, to see if there are shifting trends in this area.

As he also notes, the study shows that prices tend to flatten out across U.S. regions, probably due to the transparency of online prices. Whether that means prices tend to rise in unison or settle at lower levels is an important one to study in further detail, Cavallo observes, since it affects the cost of living and purchasing power from place to place.

"That has implications for economies and how it affects welfare," Cavallo says. "Some people will win, some people will lose. ... Hopefully we can continue doing this and see how things change over time."

Source: Massachusetts Institute of Technology

related articles:

popular articles:

Thumbnail-Photo: COVID-19: lasting changes in the way local pharmacies operate...
04.06.2020   #brick and mortar retail #coronavirus

COVID-19: lasting changes in the way local pharmacies operate

Survey of American NCPA (National Community Pharmacists Association)

COVID-19 is changing the way local pharmacies do business, perhaps for the long term, according to a new survey released by the National Community Pharmacists Association.According to the survey, 61 percent of community pharmacists anticipate that ...

Thumbnail-Photo: Listen to the heartbeat: Music in the store
07.04.2020   #in-store marketing #customer analysis

Listen to the heartbeat: Music in the store

The best playlist for the store

Taste is one thing, science is another. Because the sounds that entice people into purchasing are not just a matter of chance. In an interview with the Sound Experts, we learn more about the planning of playlists for brick and mortar stores. ...

Thumbnail-Photo: German prestige beauty industry generates 3,2 billion € in sales for...
14.04.2020   #online trading #brick and mortar retail

German prestige beauty industry generates 3,2 billion € in sales for 2019

Sales are driven by skincare and fragrances

The sales of beauty products sold in the prestige beauty market generated 3,2 billion € in sales during 2019, according to The NPD Group. Within the five largest countries for sales of prestige beauty products in Europe, which are tracked by ...

Thumbnail-Photo: Online fashion retail sales revenue plummets by over 30 percent...
03.04.2020   #online trading #e-commerce

Online fashion retail sales revenue plummets by over 30 percent

New data from Nosto about online shopping in Europe and the US during the COVID-19 pandemic

Online fashion, apparel and accessories retailers in the US and key European countries have seen revenues fall by over 30% year-on-year in March due to the coronavirus epidemic according to a new report. However, traffic did not drop by as much, ...

Thumbnail-Photo: A return to core competencies: visual merchandising and customer service...
04.05.2020   #brick and mortar retail #services

A return to core competencies: visual merchandising and customer service

Showrooming with samples in brick-and-mortar retail

Brick-and-mortar stores are facing tremendous pressure: competition, pricing pressure, shifting consumer habits. Is setting up your own online store the answer? Unfortunately, it’s not that simple. ...

Thumbnail-Photo: Online channel may not be the savior clothing retailers hoped for...
13.04.2020   #online trading #e-commerce

Online channel may not be the savior clothing retailers hoped for

Closing distribution centers for employee safety

Since the UK Government enforced stores to close for the foreseeable future, many non-food retailers hoped that customers would divert spend onto their online channels. However, last week, Next – the UK’s third largest clothing retailer ...

Thumbnail-Photo: The eye is shopping too!
20.02.2020   #brick and mortar retail #decorative lighting

The eye is shopping too!

Visual merchandising and product presentation at EuroShop 2020

For a successful purchase, it sometimes takes more than just a full wallet. Customers want to be addressed in the store - not only by staff, but also visually. We also took a look around EuroShop in terms of visual merchandising and product ...

Thumbnail-Photo: Crowdsourcing campaign to save Modells Sporting Goods and 3300 jobs...
03.03.2020   #digital marketing #brand management

Crowdsourcing campaign to save Modell's Sporting Goods and 3300 jobs

Mitchell Modell offers outside investment opportunities

Modell's Sporting Goods, America's oldest, family-owned and operated retailer of sporting goods, has announced that for the first time in its 130-year history, they are closing more than 15 percent of the stores in its fleet, and offering ...

Thumbnail-Photo: COVID-19: majority of Americans changing how they shop...
01.04.2020   #online trading #brick and mortar retail

COVID-19: majority of Americans changing how they shop

Most consumers are stocking up in-store, despite health concerns and empty aisles, according to the new Shopkick survey

As uncertainty and anxiety rise across the country due to COVID-19, Americans are doing whatever it takes to stay safe and healthy, including changing the way they shop, according to a new survey by leading shopping rewards app Shopkick. In fact, 76 ...

Thumbnail-Photo: Start food waste reduction!
13.03.2020   #sustainability #food retail

Start food waste reduction!

New report provides tips for the food industry

The Food Waste Reduction Alliance (FWRA) — a collaborative effort of the Consumer Brands Association, FMI - The Food Industry Association, and the National Restaurant Association—released a new report,“ Messy but Worth It: Lessons ...

Supplier

POS TUNING Udo Voßhenrich GmbH & Co KG
POS TUNING Udo Voßhenrich GmbH & Co KG
Am Zubringer 8
32107 Bad Salzuflen