Showrooming: the consumer practice of visiting a brick-and-mortar store to view a product—then purchasing the product online. While many individuals still prefer buying merchandise they can see and touch, just as many will make their purchase decisions based on lower prices through online retailers. Local stores essentially become showrooms for online shoppers.
Brick-and-mortar retail stores must miss the ‘good ol’ days’ of limited online retail competition. In the late 1990’s, the online retail shopping model had not yet matured into wide acceptance, as Internet access was typically limited to home and office PC’s. Yes—the technically astute shopper had the choice of two buying modes. Rank-and-file consumers still considered their trip to the retail store to be the best purchase experience. Competition between retail sellers was still fierce, but at least it was store-vs-store.
Then the dot-com bubble developed, and from this online shopping trends grew at geometric rates. Even with the collapse of the dot-com bubble in the early 2000’s, the good ol’ days were long gone for brick-and-mortar retailers. (For a short while the retail store owners had cause to celebrate. No doubt they cheered wildly as various renditions of dot-com stores collapsed.) But for online retailers inside a sound business model—buyers had seen the item prices and bookmarked the websites: online retail was in and in to stay.
The playing field remained reasonably level even through the mid-2000’s. Online shopping still came at a cost of convenience. A return trip home to visit the computer was still required to make the online purchase and the showrooming trip did not yield much immediate buyer gratification. Then the worst nightmare of brick-and-mortar retails became reality: Internet-enabled smartphones and tablets took off.
With the proliferation of smartphones and tablets, shoppers could instantly check item availability, prices, and shipping costs on the spot. That spot could be right outside the retail store (and to add insult to injury—sometimes in the neatly kept dressing rooms.) With the proliferation of Showrooming, a global trend among rank-and-file consumers grew into a global sales catastrophe for brick and mortar retail shops measured in the billions. $217 billion in a recent year’s measure.
So the retail stores put up a last line of defense.. Several techniques to counter the showrooming trend were attempted. For example, the ‘we’ll meet or beat any online price’ tactic was implemented in various styles. A problem immediately surfaced: consumers could locate one-off deals that were transactional difficult to complete, yet still ‘any online price’.
Obviously that didn’t work very well either, but at least it held the line against people who planned to conduct their online shopping while trying on sizes in the dressing room.
To bring the numbers into perspective, we have compiled industry statistics that indicate how the Showrooming trend has affected consumer shopping patterns:
- According to a study done by IBM: In China, 26% of shoppers admitted to showrooming. This is an extraordinary metric, considering China’s government is not particularly fond of online anything.
- According to Forrester Research: 20% of U.S. consumers now use their smartphones while in stores to compare prices between the retailer they’re visiting and other retailers online. There we go with the PDA shopping in the dressing rooms again.
- Then more bad news for brick-and-mortar retailers: the house was divided against itself. Of consumers who are Showrooming, 33% say they ultimately end up buying a product elsewhere, either at another physical store or online based on the information they found. Now the brick-and-morter’s were at it with each other door-to-door and website-to-website.
- Finally, 96% of the 2,000 people who completed the survey say they plan to research prices in the same way or more in the future.
The small to mid-size brick-and-mortar firms are not the only firms struggling with Showrooming. A study released by the analytics company Placed indicates major US retailers are at considerable risk from Showrooming with “Retailer Risk Index.”
There are the Australian retailers who are in the same risk of the showrooming effects. Example firms include retailers such as: Bed Bath N’ Table, Toys ‘r’ Us, Harvey Norman, Dick Smith, JB Hi-Fi, K-mart, Target, Myers, and David Jones.
What are the leading techniques to combat showrooming? We will split this discussion into two parts.
- Part I: the traditional tactics brick-and-mortar shops can implement. We see this as you do—common sense, and probably something you already engaged in. But for completeness of discussion, we will cover five actionably strategies that provide the in-store line of defense against online retailers—hence Showrooming.
- Part II: advantages provided by online pricing research and analysis software. In essence—using online retail price information as business intelligence against the online retailers. (They have to publish their prices online—you do not!)
Part I: Traditional tactics to render Showrooming less of a competitive threat:
- 1. Offer a total value proposition that the online stores can’t match. For example: include in-depth product knowledge, product installation, convenient return & refund policies, and more comprehensive warranty coverage. In net: produce a shopping experience that transcends buying decisions made on only price-to-price comparisons.
- 2. Work with manufacturers to produce private label product lines that are exclusive to in-store only purchases.
- 3. Work strategically with brand makers to offer customizable products that are exclusive to in- store purchase only.
- 4. Create high-value product bundles that appeal to customers and offer the convenience of one-stop shopping.
- 5. Allow customers to order online and pick-up at the store. Through this tactic, brick-and-mortar retailers can greatly improve customer service and turn their stores into powerful assets that online-only retailers simply can’t match. There are a small number of retailers in Australia that already offer this feature on their websites.
Part II: Use retail online pricing as a competitive business intelligence tool.
- 1. Software now exists to conduct online pricing data discovery at layers of accuracy and completeness that are astounding. Brick-and-mortal retailers can now know (in real time) what online pricing challenges they face.
- 2. Shop Retailers can adjust prices in response to real-time pricing data as easily as online retailers—and with much greater buyer appeal. (The ‘on sale’ sign works magic with both the impulse and value-based shoppers.) Promotional and ‘on sale’ prices can be implemented daily, if so desired, to match the knowns of what online shoppers will find in their price-hunting expeditions.
- 3. In cases where the brick-and-mortar shops also run on-line sales stores, the advantage of pricing data discover is two-fold: retailers can choose head-to-head price competition or apply the tactics indicated above to compete with the natural advantages of brick-and-mortar shops.
Here’s the game changing tactic to counter Showrooming: use online pricing business intelligence software. Brick-and-mortar stores once faced the threat of Showrooming and online price shopping ‘in the dark’, with regard to online price competition. The time required for manual scans of online prices was simply prohibitive. Now, business intelligence software exists to conduct online pricing data discovery automatically.
To conclude this article: a warming and happy thought. Every morning a brick and mortar store owner can start the business day knowing the exact item prices of their online retailer competitors. The online retail competitors, however, do not have that information about the prices you choose to offer to your customers.
CashRegistering. With sound real-time pricing data—gathered through automated online pricing discovery—the issues of Showrooming and online price competition can be correctly countered. The customers are already in your shop and CashRegistering can become the norm again.