The following article appeared on today's WSJ, it's a bit long, but lots of insightful information for deal hunters.
Phone-Wielding Shoppers Strike Fear Into Retailers
By MIGUEL BUSTILLO And ANN ZIMMERMANTri
Tang, a 25-year-old marketer, walked into a Best Buy Co. store in Sunnyvale, Calif., this past weekend and spotted the perfect gift for his girlfriend.
Last year, he might have just dropped the $184.85 Garmin global positioning system into his cart. This time, he took out his Android phone and typed the model number into an app that instantly compared the Best Buy price to those of other retailers. He found that he could get the same item on Amazon.com Inc.'s website for only $106.75, no shipping, no tax.
Mr. Tang's smartphone reckoning represents a revolution in retailing—what Wal-Mart Stores Inc. Chief Executive Mike Duke has dubbed a "new era of price transparency"—and its arrival is threatening to upend the business models of the biggest store chains in America.
Until recently, retailers could reasonably assume that if they just lured shoppers to stores with enticing specials, the customers could be coaxed into buying more profitable stuff, too.
Now, marketers must contend with shoppers who can use their smartphones inside stores to check whether the specials are really so special, and if the rest of the merchandise is reasonably priced.
While many holiday consumers refuse to pay full price, retailers are trying to outdo one another by encouraging shoppers to spend more, but without giving away the store. Elizabeth Holmes discusses some of retailers' most popular discount tactics.
"The retailer's advantage has been eroded," says Greg Girard of consultancy IDC Retail Insights, which recently found that roughly 45% of customers with smartphones had used them to perform due diligence on a store's prices. "The four walls of the store have become porous."
Some of the most vulnerable merchants: sellers of branded, big-ticket items like electronics and appliances, which often prompt buyers to comparison shop. Best Buy, the nation's largest electronics chain, said Tuesday that it may lose market share this year, a downward trend that some analysts are attributing in part to pressure from price comparison apps.
Smartphone fans such as Mr. Tang are still a small subset of shoppers. It remains unclear whether large numbers of Americans will be willing to take the extra time to compare offers with mobile programs. Some consumers may want to deploy the technology only when buying expensive or unusual items.
Still, store chains are increasingly concerned about the ability of mobile-equipped shoppers to tilt the balance of power in retailing toward consumers—in part because their numbers are quickly rising.
On the Friday after Thanksgiving a year ago, consumers using mobile devices accounted for just 0.1% of visits to retail websites, according to Coremetrics, a division of International Business Machines Corp. that estimates e-commerce activity. This Black Friday, they accounted for 5.6%, for a 50-fold increase.
E-commerce experts expect use of shopping apps to mushroom as more Americans purchase smartphones.
Dozens of mobile shopping apps are already available through Apple Inc.'s
iTunes, and programmers are busy developing many more to transform smartphones into shopping weapons. Many of them use phone cameras to photograph bar codes and QR codes, or simply let users speak a product's name into their devices.
TheFind app has been out for four weeks and has been downloaded 400,000 times, according to the company. RedLaser, an app that allows shoppers to use mobile-phone cameras to scan bar codes to compare products and prices, has now been downloaded six million times since it was introduced in May 2009, says parent eBay Inc.
Although store executives publicly welcome a price-transparent world, retail experts don't expect all chains to measure up to the harsh judgment of mobile price comparisons. Some will need to find new ways to survive.
."Only a couple of retailers can play the lowest-price game," says Noam Paransky, senior manager at consultancy Kurt Salmon Associates. "This is going to accelerate the demise of retailers who do not have either competitive pricing" or a standout store experience.
Because consumers made more frugal by the economic downturn are flocking to the cheapest offers they can find, comparison shopping via smartphones is making it harder for many retailers to charge higher prices in stores than on their websites.
"Those days are over," says Laura Conrad, president of comparison site PriceGrabber.com. Despite the higher costs associated with a bricks-and-mortar store, "The line between offline and online has been blurred."
This week, Best Buy settled a lawsuit by the Connecticut attorney general alleging that it showed web prices at in-store kiosks that were higher than those customers saw on home computers.
For diehard deal-hunters such as Mary Saunders, a Virginia mother of two, the phone is fast becoming the weapon of choice in the battle for the best bargain. Hunting for Christmas gifts on a recent afternoon, Ms. Saunders used her iPhone at several stores to scan bar codes on every item on her children's Christmas wish lists, saving $2 here and $3 there.
Ms. Saunders still gathers newspaper circulars and visits all the big stores near her home in Stephens City, Va., to scrutinize specials. But her phone gives her a new sense of empowerment.
"I am slightly obsessed with getting the best deal," says Ms. Saunders, a substitute teacher. "So to me, the bar code scanner is the coolest thing in the world."
While e-commerce experts say many U.S. retailers have been slow to react to the mobile trend, some are starting to see that there is upside as well as disruption: Now retailers can virtually target customers inside competitors' stores.
Through a partnership with TheFind, Best Buy now targets personalized advertisements to shoppers when the program detects that they are in stores such as Wal-Mart.
If shoppers use TheFind's free app to compare prices on TVs at Wal-Mart, for example, the phone gleans the particulars from their recent search and shows them ads of similar electronics for sale at Best Buy. The items aren't always identical, and the prices aren't always better, but it is an attempt by Best Buy to enter the competition, similar to the way that marketers now target special offers to consumers based on what they are searching for on home computers.
"That is an opportunity to steal a sale right when someone is in the throes of making a decision. That is what makes mobile so powerful," says Best Buy Chief Marketing Officer Barry Judge, who believes retailers must "dive in headlong" into the new environment.
The hard sell doesn't stop there. If a customer inside a Best Buy compares prices through TheFind and discovers a better deal elsewhere, the retailer also makes one last pitch for the sale with ads showing them deals on other products at the store, such as a similar Blu-ray player that comes with a free movie disc.
"Instead of letting that person walk out, you are telling the customer, 'Look, we know you're already here, let's make a deal,'" says TheFind's Chief Executive, Siva Kumar. "It is not a consumer-only game. Retailers can use it to their advantage."
While Best Buy is aggressively entering the stores of rivals, it still refuses to match competitors' prices shown on comparison programs. Best Buy's guarantee applies only to deals in print advertisements by neighboring competitors, a policy Mr. Judge admits Best Buy may have to change.
Wal-Mart plans its own countermeasures to capture mobile sales, says Gibu Thomas, the company's senior vice president of mobile and digital strategy.
But the company, which doesn't see mobile-phone apps as a threat to its discount model, says it is wary of moving too rapidly and frets about being seen as Big Brother by following customers' movements as they shop.
"We continue to believe that we are the best-positioned global retailer for now and the years ahead," a Wal-Mart spokesman says.
Pure online sellers are also venturing into stores—virtually, that is—with mobile programs meant to steal away sales from bricks-and-mortar rivals.
Amazon.com released a new comparison app last month that allows iPhone users to scan bar codes, take pictures of items on shelves or describe products by speaking into their devices, to see whether the online giant can beat the store's prices.
"We want customers to feel confident in their purchases, and by allowing them access to Amazon's information wherever they are, they will be," says Sam Hall, director of Amazon Mobile.
The hassle of multiple store visits still outweighs the allure of small savings for smartphone warriors such as Matt Binder, a 24-year-old employee of a startup web company in New York City. But when presented with an option to click a button to save a few dollars, he gladly complied.
Armed with an iPhone loaded with Amazon's Price Check app, he was searching for holiday gifts on a recent Sunday in a Westbury, N.Y., Best Buy when he spotted a stocking stuffer, a two-gigabyte USB drive, for $11.99. He snapped a picture of it, and learned from the app that Amazon had it with more memory for $9.99.
"I wouldn't drive somewhere else to save $2," he says, but he made a mental note to buy it from Amazon later when he got home, to save precious battery power on his shopping tool.
At Wal-Mart, he saw the same flash drive, beside a big display boasting "Every Day Low Prices." But thanks to his smartphone, Mr. Binder knew better. The advertised price was $6 higher than Amazon's.
Indeed, the mobile phone threatens to undercut Wal-Mart's once novel strategy: promising to save consumers money on their overall shopping baskets instead of promoting individual items.
"The whole notion of going to one place to buy everything in one fell swoop because you are sure of a total market-basket savings may go away," says Leon Nicholas of consultancy Kantar Retail.
Toys "R" Us nearly went under six years ago when Wal-Mart brutally slashed prices on popular toys in a successful bid for market share. So the toy merchant is trying to insulate itself from direct price comparisons with a strategy that focuses in part on exclusive items.
"The most successful retailers have great product," says Toys "R" Us Chief Executive Gerald Storch. "That always wins over everything else. Unless you're selling coal."
In practice, such a strategy has limitations, however. Many shoppers, especially children, want the same thing their friends got, not something else.
A day of shopping with Ms. Saunders in Virginia shows what retailers are up against.
She was approached repeatedly by shop clerks who offered to help, but rebuffed them in case they tried to talk her into buying more. Her smartphone told her a DSi game on her list goes for $10 less at Best Buy and that Target has Barbie's Fashionista dolls for the cheapest price around—by $3.
One way stores attempt to beat this price-comparison game is by stocking products that manufacturers have slightly modified exclusively for them, signaling the phone that no other store has the product.
Ms. Saunders used her iPhone to scan the bar code on a case for the Nintendo DSi handheld gaming system at Wal-Mart, but it didn't show up at other stores. A worker informed her that it is a special Wal-Mart bundle: the case plus earphones and a plug for $19.99.
But Ms. Saunders was undeterred. She typed the item's description on TheFind and discovered that Walmart.com, the retailer's website, offers a better bundle including a car adapter—for $5 less.
"It's like, 'gotcha,'" she said. "I feel so good when that happens."