Cheaper online or at the store? Heading to a store may save money
It’s always a little (or a lot) cheaper to buy a product online, right?
A comparison of online and physical store prices by Adobe, provided exclusively to USA TODAY, reveals that what shoppers pay online or in-store generally track each other closely but have diverged noticeably in some categories. And if you where to shop, that can add up to big savings.
For instance, if you’re looking for a computer or golf clubs, it’s become an increasingly better deal to buy the item online, with internet prices falling faster the past couple of years. But if you’re hunting down that hot toy for your child, you might want to head to the mall or big-box store, where prices have tumbled more rapidly since 2017.
For most products, online prices have dropped faster or climbed more modestly and that advantage has widened in recent years. Traditional retailers can charge more for some products because in-store associates provide valuable advice while online sellers continue to achieve cost efficiencies, says Taylor Schreiner, director of Adobe Digital Insight. For other items, shipping can be a hassle that offsets the other benefits internet retailers enjoy, such as low overhead.
“The digital economy has been finding efficiencies that are driving prices down,” Schreiner says. And, he adds, “When you’re getting some type of service from the (physical) store retailer, often you’re (willing) to pay more.”
Shoppers pick out flat screen TVs at a Best Buy Inc. store on Nov. 22, 2018 in Chicago. (Photo: Kamil Krzaczynski, Getty Images)
Adobe tracked price increases and decreases in nine consumer product categories since 2014. It then compared its “digital price index” (DPI) for a typical basket of goods in that category to the Labor Department’s consumer price index (CPI), which measures inflation and deflation for goods purchased offline.
Adobe says it’s uniquely suited to conduct the analysis because it measures transactions for 80 of the top 100 U.S. web retailers. And the software provider weighted price changes based on the number of sales of each product.
Here’s where online prices have the edge:
Laptop computer. (Photo: Acer)
Online and offline prices for computers track each other closely but web prices have fallen faster. Since January 2014, the DPI for computers is down 35.9% compared to a 27% decline for physical stores. Shoppers who continue paying a little more for a computer at a store are willing to pay for the expertise of a retail salesperson since computers can be complicated, Schreiner says.
Meanwhile, online retailers continue to wring costs out of deliveries, he says. Also, laptops and other computers are roughly similar in size and thus easy to ship, says Paula Rosenblum, managing partner of RSR Research, which studies the retail industry.
(Photo: Getty Images)
The gap between online and offline prices has steadily widened. Over the past five years, online prices have fallen 18.6%, versus a 5.3% drop for store prices. How can stores continue to charge so much more? As with computers, many people don’t mind paying more for their purchase in a store when they get recommendations on buying golf clubs, tennis rackets and baseball gloves, especially when fathers are shopping for their sons, Schreiner says. Many shoppers also want to see and feel the product.
(Photo: J.C. Penney)
Store prices began to rise sharply when the Trump administration slapped a 25% tariff on imported steel in March 2018. Online prices have been roughly stable over that period. Since January 2014, brick-and-mortar prices have fallen 7.7% while online prices are down 14%. Many online shoppers can easily find comparable appliances that use less steel, Schreiner says.
Tools and home improvement
(Photo: Getty Images)
Like appliances, this category saw the gap between online and off-line prices widen after the steel tariffs were imposed. Online prices have fallen 3.3% the past five years while store prices are down just 0.5%.
Furniture and bedding
Casper is a popular Internet mattress brand. (Photo: Casper)
Online and offline prices traced similar paths but began to diverge in early 2017. Since January 2014, online prices have tumbled 11.6% compared to a 2.3% dip in traditional store prices.
Schreiner credits a new crop of “disrupters” led by Casper Mattress and Floyd furniture. Their big advantage: They can ship in standard box sizes, Rosenblum says, simplifying deliveries. Casper’s mattresses are squeezed into small containers and then inflate, and Floyd touts its easy-to-assemble furniture.
A Costco employee makes an adjustent on a high-definition television at a store in Tacoma, Wash. (Photo: Ted S. Warren, AP)
Internet and store prices have followed a similar path downward. Since 2014, online prices have plunged 63.5% and offline prices have slid 59.2%. Unlike computers, most shoppers search for specific resolutions and other features and typically don’t need advice, Schreiner says. And retailers like Best Buy have been forced to stay competitive with Amazon and other online sellers, Rosenblum says.
Meanwhile, shipping is relatively simple for internet sellers because of similar sized products that can fit in standard boxes, she says. All told, they have a slight edge because of lower overhead.
Here’s where offline prices have a leg up:
Hot Wheels Super Ultimate Garage. (Photo: Mattel)
Prices have fallen faster in stores, with the gap increasing the past couple of years. Since 2014, online prices have tumbled 34.3%, compared to a 25.1% drop for offline. Schreiner mostly credits Toys “R” Us’s financial struggles and ultimate demise last year. The chain discounted items on store shelves in a bid to attract shoppers. Other stores then stepped in with aggressive pricing to try to fill the void left by Toys “R” Us after the chain went out of business.
Plus, toys can be a nightmare for internet sellers to ship because of different size products that must be matched with various-size boxes, Rosenblum says. That keeps online prices higher.
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(Photo: Getty Images)
Online and offline track closely but buying your milk and bread the old-fashioned way generally results in the best deal. Store prices are up 2.8% the past five years compared to a 3.4% increase online. Both internet sellers like Amazon and supermarkets that partner with delivery services must include the added cost of handling and transportation, Schreiner says. Those costs can be substantial for perishables like milk and orange juice.
Older woman in a drugstore. (Photo: The Motley Fool)
The gap has widened. Store prices have fallen 2.1% since early 2014 while online prices have risen 1.7%. More people are going online to buy drugs that formerly required a prescription but are now over-the-counter because they know they can find them quickly. That’s driving up the prices of the drugs online, Schreiner says.
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