To achieve its foundational promise of radically low prices, Dollar General often stocks only smaller sizes in its product lines. For example, shoppers looking for diapers would find 6- and 12-pack sizes, rather than the large, bulk packages sold by competitors such as Walmart and Target. But customers did not care much about this distinction when they found a coupon in a Dollar General circular that promised a price break on “all counts and sizes” of several popular diaper brands.

Specifically, the promotion offered Pampers Swaddlers for $9.50 and Luvs diapers for $8.50, regardless of the package size. For shoppers at Dollar General, it was a nice promotion, saving them approximately $.50 off the regular price.

However, some savvy customers quickly realized that the open-ended package requirements in the promotion could provide them with an even better deal if they insisted that other local retailers match the price. Walmart, Toys ‘R Us, and Target are some well-known guarantors, such that they promise to match the price printed on any coupon or promotional deal offered by a competitor. Thus, shoppers flooded these retailers, insisting on receiving the $9.50 price for massive bundles of 96, 128, or 146 Pampers diapers.

Next, these deal-seeking shoppers posted pictures of the Dollar General promotion, and the receipts showing how they exploited the price-matching guarantee of other retailers, on their social media pages. One early Facebook post spread like wildfire, prompting more than 16,000 shares in virtually no time.

The promise of massive bargains, which represented up to 75 percent off the retail price, and the rapid, viral spread of the option led to some real price-matching headaches for Walmart, Toys ‘R Us, and Target. Stores quickly sold out of stock, and checkout lines backed up as cashiers struggled to apply the price-matching guarantee for hundreds of customers. As the chaos reigned for about a week, the retailers lost substantial revenues on a product that usually provides strong margins.

Then the top management of the competing chains put a stop to it. Asserting variously that the promotion was too vague (i.e., it did not specify a package size) or that it could only apply to package sizes that Dollar General actually carried, these retailers stopped honoring the price match. Late arriving customers were left frustrated and annoyed that they could not cash in on the deals in the same way prior buyers had.

Customers ultimately might find themselves even more frustrated with price-matching guarantees. Although retail chains seeking to maintain a low price image have little choice but to offer such guarantees, those smart retailers also continually look for new ways to protect themselves against debacles like the diaper discount. For example, Walmart has asked Procter & Gamble to offer greater variety in package sizes, so that it can carry different sizes than its competitors do. If Walmart sells 26 diapers in a package, whereas Dollar General sells 24-diaper packs, a coupon that specifies a particular package size will never invoke the price-matching guarantee, because none of the packages will align in size. Now its competitors just need to convince Dollar General to list a single, specific size in any promotion it runs.

Discussion Question

 Considering recent developments for discount stores, how are price-matching challenges exacerbated by social media?

 

Source: Serena Ng and Shelly Banjo, The Wall Street Journal, July 23, 2014