Online prices cheaper than in store? Not so fast
Standing in the checkout line at Walmart waiting to buy a TV or the latest gadget, one might ponder whether it’s cheaper to buy the same television from Walmart online.
Turns out, it’s probably not.
According to a pricing study at the Massachusetts Institute of Technology, major retailers in the United States charge the same price for goods they sell online as compared with in stores about 70 percent of the time.
“One thing this taught me is that I don’t have to worry when I walk into a store, I don’t have to check theprice,” said Alberto Cavallo, a professor of information technology and applied economics at MIT who conducted the study.
Part of the Billion Prices Project at MIT that tracks inflation, the study, which was published in the American Economic Review, is the first large-scale comparison of online and in-store prices, according to Cavallo.
It looked at more than 24,000 products in 10 countries, including 8,000 in the United States, offering a glimpse behind the scenes into retailers’ pricing strategies and whether shopping online is a good value for consumers.
The study, which ran from December 2014 to March 2016, paid recruits to visit stores and scan the barcodes of as many as 50 products from toothpaste to TVs. Retailers included some of the nation’s largest, from Walmart, Target, Stop & Shop, Best Buy, Staples, and CVS, to clothing stores such as Old Navy, Gap, and Banana Republic. The data were fed into a computer program that matched the barcodes to products on the same retailer’s website, comparing prices within seven days of the in-store purchase.
The findings, published last month, showed that while prices matched most of the time in theUnited States, when they didn’t, they tended to be lower online. In the United States, online prices were lower online 22 percent of the time, and higher 8 percent.
Cavallo then took the research a step further, comparing a smaller subset of products sold online and in stores with merchandise on Amazon, which sells goods almost entirely online, to see if retailers were pricing goods to compete with the mega e-retailer.
On average, Amazon prices were about 5 percent lower, he said.
According to the study, about 90 percent of sales in the United States continue to take place in stores, and only 10 percent are online. Cavallo said that may be because retailers know that many shoppers research online before heading to the store and consumers would probably react badly to price differences for the same goods from the same retailer.
“Consumers don’t think it’s fair when they see a different price online,” he said.
The best deals online came not on electronics or clothes, but on toiletries.
For drugstores such as CVS, the study found identical prices just 38 percent of the time, with products priced lower online.
Apparel prices, by contrast, were the same online and in stores about 92 percent of the time, and 83 percent of the time for electronics.
Cavallo said he thought drugstores may be charging customers more for items in store when they need them, while offering lower prices to those who wait for items to be delivered.
The study was a pure analysis of pricing, so there is one caveat: The comparisons do not include shipping costs as an added pricing factor. And if a product was on sale, either online or in store, that may have also affected the results, he said.
Michael J. DeAngelis, a spokesman for Woonsocket, R.I.-based CVS, said the company had not reviewed the data used by researchers, but added that CVS does not typically offer different prices online versus in its stores. DeAngelis said online-only discounts as well as competitive local pricing might account for cost discrepancies.
“Our goal for pricing items on CVS.com is to use the most common price of an item across the entire chain,” he said.
Office products retailers also had a bigger variability in prices online and in the store, with prices matching just 25 percent of the time. But there were no clear patterns — prices were sometimes higher and sometimes lower online.
Edgar Dworsky, the founder of Somerville-based Consumerworld.org, said such findings are a reminder to consumers that it is still important to shop around and compare prices.
“Many stores have price guarantees that allow shoppers in either venue to obtain the price charged at the other,” he said.
The study also found significant differences in the way retailers price goods online and in store around the world.
In Brazil, for example, overall prices were the same just 42 percent of the time, while in Canada they were identical 91 percent of the time.