In fight to woo shoppers, retailers shifting pricing strategies

A new trend has emerged in the retail sector over the past few years as consumers increasingly seek out bargains.

The New York Times reports that although retailers have historically held the upper hand in pricing goods, shoppers are more and more flexing their bargaining powers in an effort to maximize their disposable income. The financial and housing crises, and the resulting recession, fundamentally altered the ways in which stores and their customers interact.

While, for example, haggling was once only common in markets with fluid pricing models, shoppers are using technology and their competitive advantage to pay less for more. Start-ups have sprung up around the U.S. that are helping consumers compare pricing in brick-and-mortar stores with items online, and in an effort to maintain relationships with buyers, retail chains are negotiating item prices, according to The Times.

Seattle, Washington-based online retailing giant Amazon is benefiting from such a shift in consumer interactions. The company recently offered shoppers the ability to scan barcodes on books at stores such as Barnes and Noble, and it promised to beat prices charged by such firms. Apps for smartphones that also allow consumers to scan product barcodes have become more common, helping swing the pendulum of bargaining power away from stores and toward shoppers.

The industry-wide shift has left some stores scrambling to keep pace, according to analysts. Retail chains have unveiled a variety of strategies to ingratiate themselves to shoppers, though some have yielded middling results. Wal-Mart has slashed prices across the board as it works to keep its core group of shoppers from flocking to Amazon and other low-cost competitors, while J.C. Penney also overhauled its own pricing schemes in an effort to woo back jaded shoppers.

Shoppers, however, are enjoying the shift in power dynamics. Though consumer spending has slowly crept up over the past year or so, Americans as a whole remain cautious about future growth prospects. When coupled with the effects of volatile energy prices and stagnating wages, such factors have created a new kind of retail environment where pricing is fluid.

"The customer knows the right price," J.C. Penney chief executive Ron Johnson said. "We can raise the price all we want; she's only going to pay the right price. And why is that? Because she's an expert."

Johnson, who only recently took over the helm at the national retail giant, has tried to reinvigorate the struggling brand. Like many of its rivals, J.C. Penney has historically offered discounts and sales throughout the course of the year, but Johnson has instead instituted a policy that streamlined discounting. The company has also overhauled supply chain management and reworked strategic sourcing, decisions analysts say will help fuel future growth.

Luxury brands have seen sales and overall revenue jump over the past year, as high-end buyers have increased their personal expenditures after a downturn following the recession. Their low-cost counterparts, on the other hand, are fighting to lure shoppers who have an inordinate number of stores – both brick-and-mortar and online – among which they can choose.

Many retail chains have also had to overhaul their approach to sales pricing because consumers have become savvier to traditional models, according to Marcum LLP head Ronald Friedman.

"The shopper knows to wait for the sale," he said. "They know the prices are inflated when they first come out."

J.C. Penney has cut prices by roughly 40 percent as a result, while Wal-Mart has also slashed prices as it works to prevent an exodus of shoppers. Still, with online firms continuing to attract customers away from traditional retail giants, the war to woo consumers is only just beginning, experts say.