Price Match Guarantees in the Age of Showrooming: An Empirical Analysis

47 Pages Posted: 14 Nov 2018

See all articles by Chunhua Wu

Chunhua Wu

University of British Columbia (UBC) - Sauder School of Business

Kangkang Wang

University of Alberta

Ting Zhu

Purdue University - Krannert School of Management

Date Written: August 2018

Abstract

Consumer showrooming – the behavior of examining a product in a brick-andmortar store and later buying it from an online retailer – is seen as a major threat to brick-and-mortar retailers. To combat showrooming, Best Buy announced a price-matching policy in 2012 to compete with major online retailers. In this paper, we examine the impact of Best Buy’s price-matching policy on the price competition between Best Buy and Amazon across a wide variety of product categories. We empirically explore Best Buy’s and Amazon’s pricing patterns using unique datasets collected from different sources, and find robust results that the competitive effect of the price-matching policy depends on the showrooming value of a product. For those products that offer consumers large value from physical store experiences – i.e., the “showrooming products” – the policy led to more intense price competition. Moreover, Amazon cut prices more aggressively than Best Buy. For those products that offer relatively small showrooming value – i.e., the “non-showrooming products” – it alleviated price competition. We also provide theoretical explanations for the findings and illustrate why the price matching policy did not reduce the price gaps between Amazon and Best Buy.

Keywords: Showrooming, Price matching, E-commerce, Price competition

JEL Classification: M31, L11, L81

Suggested Citation

Wu, Chunhua and Wang, Kangkang and Zhu, Ting, Price Match Guarantees in the Age of Showrooming: An Empirical Analysis (August 2018). Available at SSRN: https://ssrn.com/abstract=3271305 or http://dx.doi.org/10.2139/ssrn.3271305

Chunhua Wu

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Kangkang Wang

University of Alberta ( email )

Edmonton, Alberta T6G 2R3
Canada

Ting Zhu (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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