EagleTribune.com, North Andover, MA

November 4, 2012

A virtual retail war

Bricks-and-mortar merchants battle online competitors for holiday dollars

By Shan Li Los Angeles Times
The Eagle-Tribune

---- — The battle is on between bricks-and-mortar retailers and their increasingly potent Internet adversaries.

Frustrated by once-loyal customers who have been wooed away by online merchants, retailers are gearing up with new weapons to stop the continuous flow of shoppers from stores to computers and smartphones.

With the holiday season approaching, some chains are vowing to match prices with their biggest online rivals. Others are offering free layaway and expanding their assortment of unique products or adding Wi-Fi and other digital upgrades inside stores to entice tech-savvy shoppers. There’s even increasing talk about same-day deliveries.

“We think we have a huge advantage over Internet-only companies,” Toys R Us Inc. Chief Executive Jerry Storch said in an interview. “Every possible way the customer wants to use the Internet — or their neighborhood store — to interact with Toys R Us is available. The customer can choose how to do business with us.”

Online merchants say they are ready to fight. Nearly a quarter of shoppers say they’ll go online to do most of their holiday shopping this year, according to a survey from consulting firm Deloitte, and 75 percent said they expect to buy at least one item online this season. But Web retailers said they sense the competition with traditional retailers and are busy as well, kicking off their holiday ads before Halloween and expanding free shipping and other promotions.

Amazon.com Inc., the nation’s largest online retailer, has geared up.

“Every year we want to offer great deals,” spokeswoman Pia Arthur said. “We will have fun types of things going on for the holidays.”

It’s always a high-stakes competition for the retail dollar, and experts say this year it’s more intense than ever. And no wonder: Merchants rake in an estimated 25 percent to 40 percent of their annual sales in the last two months of the year. Shoppers this year will drop an estimated $586.1 billion during the holidays, according to the National Retail Federation.

“If the stores don’t do more, then they are going to become antiquated,” said Marshal Cohen, chief industry analyst at NPD Group. “But that is why they are doing so many things right now to test what works, and to tell shoppers that they are in the game to play.”

Traditional retailers will have to work hard to win back long-lost customers such as Paul Johnson, once a regular at malls but who now buys “almost everything” online.

“It’s such a hassle running around to stores trying to find anything you want,” said Johnson, a 30-year-old fashion model from Los Angeles, who prowls the Internet for items on his wish list — including kitchen supplies, DVDs and cotton T-shirts.

Best Buy Co. Inc. and Target Corp. are taking direct aim at Web merchants with online price matching, partly to grab customers who now use their stores as showrooms — to check out items and then go buy them more cheaply on the Internet.

“We are taking on showrooming,” said Amy von Walter, a spokeswoman at Best Buy, which has granted salesclerks the ability to match online prices for appliances and hardware, including tablet computers and cameras, during this holiday season. “It’s really about empowering employees to be able to match the price when it makes sense and make the sale.”

Target vows to match prices with Amazon and the Web stores of Wal-Mart Stores Inc., Best Buy and Toys R Us.

“It’s instant gratification for guests,” said Dustin Hamilton, Los Angeles district manager for Target. “Instead of waiting one day or four or five days for something to come in the mail, you get it right away for the same price.”

The discounter has also added free Wi-Fi to its stores and placed QR bar codes — which can be scanned by smartphones to bring up product information — on ads so shoppers can buy the items directly from their phones.

Toys R Us has extended free layaway until Dec. 16 and rolled out a reservation service so parents can nab popular playthings early and avoid frantic last-minute searching during the holidays.

“You can go order online and pick it up immediately at your neighborhood store,” said Storch, the CEO. “You don’t have to wait around home for FedEx to arrive or come home to the little sticky note on the door.”

The chain is also pushing the idea that shoppers can browse an expanded lineup of items found nowhere else, including a $150 kid-oriented tablet computer called Tabeo.

Wal-Mart, which already allows shoppers to buy items online and pay for them in cash in stores, is extending layaway and has slashed the price for opening a layaway account. The world’s biggest retailer is also testing same-day delivery on certain gift items in three cities and expanding the experiment to San Francisco and San Jose, Calif., in early November.

The goal is to entice customers with tools that enable them “to shop when and where and how they want,” said Ravi Jariwala, a company spokesman.

“Our vision is to win at e-commerce,” Jariwala said. “We can do that by connecting the website with stores, and that gives us a unique advantage.”

At the Grove shopping center in Los Angeles, Tom Spoon, a 24-year-old engineer, said he normally orders holiday gifts online and ships them to his parents’ home in Atlanta. But after hearing retailers roll out so many promotions this year, the Santa Clarita, Calif., resident said he might browse the malls more this season.

“That would be good for last-minute gifts that you can’t wait for, and you can still make sure to get a good price,” he said. “Otherwise, if you don’t comparison-shop online, you’re just not a smart consumer.”

Meanwhile, online heavyweights are beefing up for the holidays as well.

Amazon is typically tight-lipped about holiday plans. Last year the retailer raised a ruckus by offering a 5 percent discount for smartphone users if they checked the prices of goods on their price-comparison app in a physical store but ended up buying it on Amazon instead.

EBay, the online auction and retail site, is dabbling in same-day delivery in San Francisco for shoppers who buy using its eBay Now application. Valets will hand-deliver diapers, shoes or even toilet paper to a place of the customer’s choosing.

“We can get items from their phone to their door in as little as an hour,” spokeswoman Johnna Hoff said.

Jonathan Johnson, president of bargain site Overstock.com, said e-commerce is “the way it’s going to go.”

“The prices are better; it’s more convenient,” Johnson said. “Particularly with gas prices high and the ease of returns, online is well positioned for the holiday season.”

Fashion retailer Karmaloop.com is offering free shipping through the holidays. E-commerce “is almost overtaking brick-and-mortar,” company spokeswoman Abigail Jansen-Lonnquist said.

“The online platform can be used to comparison shop and really make sure that when times are tight, you get the best deal and can hit 10 stores without leaving the baby or finding a baby sitter or driving,” Jansen-Lonnquist said.

Analysts say despite all the hoopla, temporary holiday promotions may not help traditional retailers in the long run.

“The current strategy these guys have of matching prices is not a sustainable long-term strategy,” said Sucharita Mulpuru, an e-commerce analyst at Forrester Research. “They have to come up with a compelling store experience and figure out what kind of new services or products will make a store compelling. Because Amazon is really hurting physical retailers.”

At least this holiday season, they can count on business from Jessica Barreno, 18, a college freshman in Claremont, Calif. Although she shops quite a bit online, Barreno said that marathon sessions at the mall with her mother have been an annual Christmas tradition.

“I like the personal experience of actually going into stores,” she said. “And if this year I can get a good deal, that would be even better.”