Do low prices wear off?


Each time I go to Target to stock up on things, it seems like I get less and less value from the experience. In particular, the money I save compared to buying the same things at the closest grocery store or online seems less important. It’s not that I value the money any differently now compared to a year ago. But for whatever reason, the nagging annoyances of the big box shopping experience have increased the non-monetary costs of shopping at places like Target, and I doubt I’ll be doing much of it in the future.

For the most part, people shop at Target, Wal-Mart, and similar stores because of the low prices. But if my experience is any indication, this only lasts until the next good thing comes along, and the cost savings no longer seem worth it. For example, as people’s salaries increase over time, they’re less likely to give up convenience just to save a few dollars. But in today’s economy, that’s probably a small group at best.

Rather, the bigger challenge is what happens to low-price shoppers when new purchasing methods appear. For me, the emergence of Amazon Grocery as a viable source for more than half of my non-perishable food and household supplies means that I’m not buying that stuff at Target anymore. Of course, it hurts my local grocer too, but I’ve gone from shopping at Target every 1-2 months to probably once every 9 months. That’s a big difference, all because Amazon showed up with prices that are close enough to Target’s that I won’t even think about going there for anything Amazon carries.

What’s the point of this discussion? Retailers that sell on price are especially vulnerable to shoppers outgrowing the store as they become wealthier, find other low-cost suppliers, or change their priorities with respect to time and money. Sure, Wal-Mart and Target continue to dominate US retail. But I wonder how long that advantage will last if Amazon expands its grocery operations and other online stores follow suit.

In brief: if you sell on price, virtually any change in the marketplace can take customers away overnight. Without a fantastic in-store experience to bring people back, you’re just another chore to be reduced or eliminated when something better comes along. Ironically, the new winner doesn’t have to beat you on price. They just have to be more convenient than your offering without charging significantly more for the same products.