Price Matching Criticized From Wal-Mart to Toys ‘R’ Us: Retail

April 30 (Bloomberg) -- Bloomberg's Renee Dudley examines the practice of price matching in retail stores and whether it helps or hurts customer relations. She speaks on Bloomberg Television's "In The Loop."

This Easter, Wal-Mart Stores Inc. (WMT) aired a television commercial promoting its Ad Match Guarantee. In it, an exuberant clerk touted the policy’s benefits to a shopper named “Janette” from Lithonia, Georgia.

“That price?” he said, pointing to an advertising circular the woman had brought in. “Wal-Mart will match it right at the register. Yeah, and you don’t even need your ad!”

Price-matching has become a key marketing tactic for retailers from Wal-Mart to Target Corp. (TGT) to Toys “R” Us Inc. as they try to attract shoppers amid an uneven U.S. recovery.

It’s a risky strategy because the programs are difficult to manage -- discretion to match or not is often left to store workers -- and shoppers can complain if they don’t get the deal they’re expecting. In February, Toys “R” Us agreed to review its ad strategy after a consumer complained to an industry watchdog that workers didn’t understand how the price-matching policy worked. At Bentonville, Arkansas-based Wal-Mart, according to interviews with workers and shoppers, the Ad Match Guarantee is inconsistently applied from store to store.

Robin Sherk, a New York-based analyst at consulting and research firm Kantar Retail, said Wal-Mart is especially vulnerable because its lower-income customers are more likely to price-match than Target (TGT) shoppers.

Photographer: Chris Ratcliffe/Bloomberg

A customer places a toy product into a Toys "R" Us Inc. shopping cart. Close

A customer places a toy product into a Toys "R" Us Inc. shopping cart.

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Photographer: Chris Ratcliffe/Bloomberg

A customer places a toy product into a Toys "R" Us Inc. shopping cart.

“Shoppers can get confused,” she said. “They go to different stores and there are different policies -- even in the same store, if you go to different cashiers.”

‘Not National’

In a telephone interview, Deisha Galberth Barnett, a Wal- Mart spokeswoman, said: “It’s unfortunate that there’s a couple stores that aren’t executing our match the right way. Based on data that is representative of stores across the country, it’s not a national problem.”

Price-matching “is a necessary evil today” because once one retailer offers it, others are almost inevitably forced to follow, said Allen Adamson, a managing director at Landor Associates, a San Francisco-based brand consulting firm.

“They have to match because everyone sees everything, but how it’s done is important,” he said. “They have to do it quickly, and you have to give the consumer the benefit of the doubt because you want that consumer to be loyal to you.”

Price-matching programs vary widely from retailer to retailer. Best Buy Co. (BBY) lets customers match prices if the rival store is located within a 25-mile radius. Wal-Mart allows managers to define the size of their trade area because they are more attuned to local conditions “than anyone” at headquarters, Barnett said.

Photographer: Patrick Fallon/Bloomberg

Wal-Mart Stores Inc. signage is displayed on a check out register in a store in Torrance, California. Close

Wal-Mart Stores Inc. signage is displayed on a check out register in a store in Torrance, California.

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Photographer: Patrick Fallon/Bloomberg

Wal-Mart Stores Inc. signage is displayed on a check out register in a store in Torrance, California.

Price-Match Probe

Store workers sometimes don’t understand the rules. The Advertising Self-Regulatory Council’s National Advertising Division, which investigates claims made in national advertising, found Toys “R” Us workers didn’t know how to implement the retailer’s price-match guarantee.

The probe began in December after a shopper who wanted the store to match an online price for a dice game complained that several clerks gave him different interpretations of the policy, according to a copy of the case. A large sign in the store said: “Spot a lower advertised price? We’ll Match it.”

The National Advertising Division recommended that Toys “R” Us either “discontinue its overly broad claim” or post the limitations. The chain said it would review the strategy.

Toys “R” Us, based in Wayne, New Jersey, declined to comment.

Whether or not price-matching issues are systemic, companies “should still be correcting them,” said C. Lee Peeler, the council’s president and chief executive officer.

‘Arbitrary Policy’

Wal-Mart has promoted its “simplified” Ad Match Guarantee in national ads since 2011, when Chief Merchandising Officer Duncan Mac Naughton said the company was determined to provide low prices “backed by a clear, consistent ad match policy,” according to a press release.

Since then, the company’s customers have continued to struggle amid a weak economy and rising taxes. In February, Wal- Mart forecast first-quarter profit that trailed analysts’ estimates. Comparable-store sales in the 13 weeks ending April 26 are projected to be little changed because of slower sales in the first few weeks of the quarter, the company has said.

Still, Wal-Mart shares rose to an all-time high of 79.09 on April 23. They fell 0.3 percent to $78.18 at 9:31 a.m. in New York.

While Wal-Mart said store workers would receive “extensive” training “to ensure the price-match policy is executed consistently across all stores,” that hasn’t happened, said Richard Hampton, an overnight customer-service manager at a Wal-Mart Supercenter in Rowlett, Texas.

‘Different Reality’

“The company policy may well be as intended in the ads, but the reality is quite different and apparently arbitrary,” said Hampton, 61, who said customers have complained that stores in neighboring towns cite different price-matching rules. “As one who managed the cashiers, it was necessary for me to know the exact nature of those restrictions, and I could never get a consistent answer. Today it’s this, tomorrow it’s that.”

Railroad welder Gary Bentley said he presented an ad for Heinz ketchup at a Wal-Mart store last month in Leavenworth, Kansas, and asked to pay the lower price for the item, which was the same size and same flavor, per the policy’s fine print.

“They refused,” said Bentley, recalling the Wal-Mart cashier’s reaction to the ad from Price Chopper, a grocery store in the same town. “They just say, ‘We won’t do it.’”

Ditto for the Gatorade he attempted to buy on a separate shopping trip, said Bentley, 56. Formerly a loyal Wal-Mart shopper, Bentley said he has since visited Wal-Mart less often.

Manager Needs

John Gourville, a professor of business administration at Harvard Business School in Cambridge, Massachusetts, said how price-match requests are handled may come down to the needs of individual store managers.

“Some might not want customer complaints,” so they match whatever prices the shopper asks for, Gourville said. “Others won’t. They’ll think more about their profit margin. It comes down to what they choose to focus on.”

Hampton, who has been on medical leave since November, said cashiers were instructed about changes to ad-match rules, including decisions to disqualify certain ads. Sometimes they were told they wouldn’t be “matching oranges today,” he said. A competitor had offered them for 10 cents apiece compared with 75 cents at his store, and Wal-Mart would lose money if it matched the price, he said.

Barnett, the Wal-Mart spokeswoman, said store managers are “empowered” to decide how to implement the policy and the “expectation is that they’re making the decision with the customer’s interests in mind.” Failing to match a qualifying ad -- such as for identical oranges from a local competitor -- is “not what we expect” and “not according to the policy.”

Meat Matches

Over the past month, Wal-Mart regional managers noticed that about 10 stores in the Dallas area were approving more than the expected number of ad-match transactions for meat and produce. They discovered cashiers were matching what Wal-Mart considered to be different items, Barnett said.

The stores matched competitors’ prices on seeded oranges, for example, when Wal-Mart’s oranges were seedless. Or they matched a lower price on ground beef that wasn’t as lean as the beef sold at Wal-Mart. The workers were told not to price-match those types of items. When they passed the message along to consumers, complaints to the corporate hotline spiked, though Wal-Mart received “less than 500” calls, Barnett said.

One of the most challenging aspects of any price-matching strategy is how to define which competitors are “local.” When Virginia Russell, a retired General Motors Co. computer operator who shops at the Wal-Mart store in Commerce, Texas, presented an Albertsons ad showing lower prices for Lays potato chips, Mars and Hershey chocolate bars and grapes, she was told the Albertsons store wasn’t local, she said.

‘Walked Out’

“I put the stuff back on the shelf and walked out,” said Russell, who says store workers referred her to the Wal-Mart corporate hotline. She has tried three times in the past six weeks and has yet to get through, she said.

Sara Spector, a pharmacist who has worked at several Wal- Mart stores in central Florida, said it’s “up to the local managers what matching they will do.” Typically her store would honor only ads from competitors in the same town, said Spector, 70, who has worked for Wal-Mart for about 20 years.

Hampton sought to define “local” at his store in Texas and found it impossible to nail down, he said.

“Some managers say competing stores must be within certain distances, such as within five miles, but I could never get a firm answer on that tidbit of info,” he said.

To contact the reporters on this story: Renee Dudley in New York at rdudley6@bloomberg.net; Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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