Many ‘bricks and mortar’ retailers have websites. Some provide only product information and encourage store visits. Others allow purchases directly from it. Should a website charge lower prices than in-store? Why/why not? What other strategic issues arise from this dual channel approach?

Question

What will be an ideal response?

Answer 1

A retailer with resources in bricks as well as clicks will struggle to justify differential pricing
rationally for very long. For a while, some retailers kept web prices deliberately lower than in store
because it encouraged consumers to use their websites and encouraged them to believe that web
retailers were intrinsically lower cost. Today, most people recognise the need to shop around even,
perhaps especially on the web. Where differentials exist in favour of the website, a consumer can
choose to inspect the prospective purchase in store and order online to save money. But an
information-rich website may encourage a store visit where none was planned at the outset.
Moreover, to maintain distinct, price-competing store and website channels to sell the same
merchandise, rather than operate them as synergistic channels, leads to consumer ill will, potentially
misleading strategic decisions and probably misses the chance to secure multiple purchases and thus
greater overall profits. Websites can be useful ways to offer specialised or topical lines where the
risk of widespread store distribution is deemed too great. They can also help dispose of obsolete
products and end of lines effectively. The lesson is that retailers need to understand their preferred
business model and its strategic consequences.