The multichannel pricing dilemma: Do consumers accept higher offline than online prices?

Abstract

Whether to unify or discriminate prices in offline and online channels is a controversial topic that can be central to whether offline retailers survive in the marketplace. Field data evidence from a large multichannel retailer reveals a sobering picture. On average, only offline price premiums of approximately 2% seem feasible, and such premiums vary largely by product categories and price levels. High-priced products, which consumers perceive as risky, tend to allow offline price premiums, as do low-priced, takeaway items. However, in between these two extremes, the results show no potential for offline price premiums. Drawing on price fairness theory, we further explore consumer responses to higher offline prices in three experimental studies. In contrast with the assumptions of price fairness theory, the provision of purchase advisory services and communication of the price motive hardly stimulate consumer acceptance of higher offline prices in our context. However, the findings reveal important heterogeneity in consumer responses depending on their market segment, because some market segments indeed respond less negatively to higher offline prices. In addition, consumers accept offline price premiums for unplanned purchases.