Why holiday price-matching does not pay off

NEW YORK Wed Nov 21, 2012 11:22am EST

A woman walks out of Macy's department store with shopping bags as the busy holiday shopping season begins in New York, November 17, 2012. REUTERS/Carlo Allegri

A woman walks out of Macy's department store with shopping bags as the busy holiday shopping season begins in New York, November 17, 2012.

Credit: Reuters/Carlo Allegri

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NEW YORK (Reuters) - Are price-matching programs for holiday gifts worth the extra time and effort?

With a price-matching guarantee, consumers can buy a product any time and get a refund if the price goes down, typically within 30 days. Big retailers such as Amazon.com Inc and Best Buy Co Inc and payment processors including Citigroup Inc and eBay Inc's PayPal are offering generous price-matching policies this holiday season.

Relatively few customers will use price-matching programs for holiday gifts, though. Michael Pachter, research analyst at Wedbush Securities, a financial services firm, estimates that it will likely be around 3 percent at most.

Those figures are very low considering that half of all consumers research prices online before buying items, according to the National Retail Federation. Most simply choose the lowest-priced option and do not look back after they make that purchase.

One-fifth of those consumers, however, will check prices and then go to Retailer A and ask them to match the lower price of Retailer B before they buy, Forrester Research finds.

A low-price guarantee is a nice public-relations feature, yet the programs to obtain the cheapest price after you have already made a purchase are too restrictive to be practical, according to Pachter and other analysts. In addition, the price-matching process is often too onerous to make it worth a consumer's time.

"Price-matching is a wonderful deal, but most of us are too lazy to deal with it," Pachter said.

TOO MUCH FINE PRINT

What makes price-matching tricky is the fine print. PayPal's new program for purchases made through December 31 applies to any purchase made with PayPal, including airline tickets. It does not include close-outs, doorbusters, one-day sales, jewelry, perishables, boats, animals and a host of other items.

Amazon will price-match for 14 days, and Black Friday prices are not eligible. Stores like Best Buy, Target and Walmart exclude the days around Thanksgiving and limit the kind of stores eligible. MasterCard Inc and Visa Inc offer some limited price-matching protections with various card products - card members should check their benefits for details.

A new entrant to the marketplace attempts to overcome these obstacles. The Citi Price Rewind program allows any Citi consumer card member to register purchases at a Web portal ( here ) and search engines will troll for lower prices for 30 days. If a price drops more than $25, the consumer receives an email, fills out a form, and gets the money back.

Citi's program went into wide release last week, after a year-long private trial. In the trial, Citi said that one out of four registered purchases over $100 qualified for a rebate. Some of the items that made the cut: a Keurig coffee maker, a DKNY black suit, an Apple MacBook Pro and a Nintendo Wii Console. The ratio was even higher for products costing more than $1,000, where 39 percent received a rebate. The average refund overall was $80.

TOUGH QUALIFICATIONS

For most price-matching programs, consumers typically have to produce a print ad or a screenshot of an online price to qualify.

Citi's innovation is to do the search work for the card member. However, comparable items have to match exactly - which is, in fact, very difficult in a high-tech world where unique inventory identification numbers (SKUs) can be sliced and diced in many ways.

Items like appliances have a different number at every store. Laptops and TVs might have slightly different configurations at various retailers, making them just different enough not to qualify for price-matching. Most clothing is specific to a given retailer, so brands that are sold many places could have different identification numbers.

"If you bought Levi's 501 Jeans from Macy's for $60, will you get an alert for the Levi's 501 Jeans that JCPenney sells for $30? No idea," said Dan de Grandpre, CEO of dealnews.com ( dealnews.com ), a shopping website.

Citi's Rewind program relies heavily on its search engine, which worries de Grandpre. "It's a great idea that's only as good as the actual price-monitoring engines employed by Citi," de Grandpre said. "What stores does it track? Citi Rewind doesn't say. When Amazon updates a price multiple times a day, does Citi Rewind track that?"

Citi is optimistic that its program can keep up with the latest pricing based on its beta testing. "We've seen some good success with people who have been using it," said Ralph Andretta, Citi's head of co-brands and loyalty. The service relies heavily on the information that consumers and manufacturers supply directly, he noted.

After analyzing bargain-hunting behavior for more than a decade, de Grandpre is nevertheless unimpressed with this season's offerings. The biggest upside for participating companies? You are more likely to feel that your favorite retailer or credit card issuer "has your back," so your affinity for its brand will increase. "More loyalty for almost no cost? That's brilliant," he said.

(Editing by Lauren Young and Matthew Lewis; Follow us @ReutersMoney or here)

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