Master the challenges of multichannel pricing

Master the challenges of multichannel pricing

Retail customers may accept different prices on different channels. But are retailers ready to manage the complexities?

Chances are pretty good that at the precise moment you last shopped in a physical store for your latest washing machine or set of steak knives, the same item was being offered for a different price on the mobile app of that same retailer.

For years, customers have been pulling out their phones in stores to see how prices compare with a retailer’s competitors. But the phenomenon of looking up how prices of the store itself compare in different channels is relatively new. It has become the subject of increased interest since The Wall Street Journal reported last year that Walmart has begun charging higher prices for products online than in stores, with the goal of getting more in-store traffic.

We find that for many retailers, prices are increasingly varying between online and physical stores. Retailers tend to offer cheaper prices in the digital space, although there are exceptions, as the Walmart example shows.

Understanding what customers value in each channel and how that affects what they are willing to pay is the key challenge for pricing teams today. Getting it right has a real payoff. In our experience, retailers that effectively price differently across all channels see bottom line growth of 2 to 5 percent.

Read the full article on Sloan Management Review.

About the author(s)

Walter Baker is a partner in McKinsey’s Atlanta office; Gadi BenMark is president and general manager of McKinsey Social in New York, where Manish Chopra is a senior partner; and Sajal Kohli is a senior partner in Chicago.

The authors wish to thank Chris Moe, Josh Waite, Felix Cancre, and Arnav Garg for their contributions to this article.

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