Wal-Mart's Price-Match Illusion

When Wal-Mart on Monday (April 11) rolled out its new price-match program, it said it would match a rival's price, even if the customer doesn't have a copy of that rival's ad. In reality, that’s not the case. Not even close.

Wal-Mart's announcement made it one of the first major chains to do away with the need for the customer to produce the dead-tree advertisement that Wal-Mart is being asked to match. But that paper document is being replaced—to a major degree—with associate discretion. Will shoppers be happy trading greater convenience for less consistency?

The price-match change is part of a much bigger campaign, where Wal-Mart is trying to regain its low-price reputation. The chain is characterizing the price-match policy as "simplifying" and issued a statement that clearly said "customers do not have to bring in a competitor's advertisement. If customers find a lower advertised price, we'll match it at the register."

But in reality, that's not entirely the case. First, stores will be asked to more closely track local competitors and associates will be given lists of rivals that the store has established are offering better prices. "Our local stores are now expected to maintain a list of local competitive ads at the register to help customers find the best possible savings," said Wal-Mart spokesperson Amy Colella-Lester.

When the Wal-Mart store's management discovers those lower prices, will it immediately reduce the price on that product for all customers or do nothing and wait for a customer to ask about it and then match it at the POS? "It will be decided on a case-by-case basis," Colella-Lester said.

As a practical matter, though, will those prices ever be changed universally at a local store? How often would corporate want a store's general manager changing local prices? The price match is more attractive for two reasons. First, it sidesteps all of the problems associated with lots of local price changing.

Second, it means that customers who don't know about the lower price and, therefore, don't request the price match—which will almost certainly be the vast majority of shoppers—will be paying the higher price. From a retail perspective, that's a win-win.

But what if the customer is asking for a price match that is not on the list at POS? Given the huge number of SKUs at a typical Wal-Mart, it's certainly likely that many prices from local merchants could change—especially during short-duration sales events—without Wal-Mart noticing, especially with much smaller rivals.

When the product is not on the list, that's when things get tricky. By the way, the confusion starts with Wal-Mart's news release phrasing. In that statement, the reference to "customers do not have to bring in a competitor's advertisement. If customers find a lower advertised price, we'll match it at the register," is followed by an asterisk. That asterisk leads to a footnote that says, "Walmart will match the price of any local competitor's printed ad for an identical product." So it will match the printed ad that the customer doesn't have to show? As one Wal-Mart general manager said, "It's contradicting itself. In our own statement. Lovely."

Wal-Mart said it will now match "buy one, get one free ads with a specified price" and loyalty card advertised prices. And its exclusions—beyond Web pricing (even walmart.com prices can't be matched) and stores that are not considered local—include items that require a separate purchase to get the ad price, items requiring a purchase to get a gift card, going out of business/closeout prices, percentage discounts (Wal-Mart's example: "All mascara, 40 percent off") and private-label price promotions. Wal-Mart is also excluding "misprinted ad prices."

Beyond those exceptions, though, is a very large area for interpretation.Beyond those exceptions, though, is a very large area for interpretation and individual associate and manager discretion and judgment. That means blanket statements from Wal-Mart (such as this gem from its news release: "So if you find a lower advertised price on an identical product, tell us and we'll match it. Right at the register.") are simply not true.

The problem with discretion in price matching is not merely the inconsistency from Wal-Mart to Wal-Mart and from associate to associate, but it's the temptation to adjust those decisions to deal with economic realities. Although they never state it explicitly, won't GMs under margin pressure during certain months be inclined to signal to associates to tighten how many discretionary product matches they should confirm? The policy of not requiring paper proof from customers is also going to give those customers less leverage to get that price, if it falls within that discretionary window.

Wal-Mart's Colella-Lester said her chain is trying to minimize those whim-based pricing situations, mostly through training. "Since last fall, we've launched an extensive associate training program to ensure the policy is executed consistently across all stores," she said.

That training includes videos and what she referred to as mini-lessons. "Lessons provided in regular store meetings include role-play cards and talking points," Colella-Lester said.

This program is starting off with the right approach, because forcing customers to bring in crumpled pieces of paper to get a price match is a bad idea for so many reasons. Mobile devices will help with this tremendously, allowing for a screen capture to be displayed instead.

The uncertainty, though, is much more troublesome. Why not instead make the price match universal, with associates/managers performing periodic spot checks—such as phoning that competitor to verify—to keep the customers honest? If the price matches are modest, is it not better to have a solid, consistent program? What better way to signal a commitment to low prices?

Every customer whose price match is declined for what that customer may see as a whim is going to cause far more word-of-mouth damage than accepting 10 matches that aren't necessarily legitimate.

The biggest problem, though, is the lack of matching for Web pricing. This is nothing specific to Wal-Mart; quite a few retail powerhouses have opted to exclude E-Commerce offers from price matches. This approach, we would argue, is a bad idea. E-Commerce is a rival for your customers' dollars, and no policy is going to change that.

By having a blanket online price exception, you are strongly reinforcing the message that E-Commerce sites offer better deals. And you are then robbing yourself of the opportunity to fight that perception.

As for also excluding your own site's pricing, that is a regrettable move for so many reasons. You have the customer in your store, he or she wants the product and is prepared to consummate the deal right here and now. Why not treat all arms of Wal-Mart as the same, the true merged-channel perspective? That's what the customers want and what they expect. Opting to not support it, well, that's the best gift for your online rivals you can possibly offer. It's not like Amazon.com is some irrelevant niche player.