Showrooming Turns Merchandising On Its Head

  • November 11, 2013 at 3:20 PM EST
  • By Lorna Pappas, Contributing Editor
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As long as people have been shopping, they’ve tried to purchase products at the lowest possible price. Comparing prices became easier in 1934 when Service Merchandise forged ahead with the catalogue-showroom sales format, which spiked in the mid-1970s. Though discount chains and Internet shopping soon replaced this model, the concept of ‘showrooming’ had been born.

Now a buzz word and course-changing trend, showrooming became a retail hot-button when the smartphone first met Internet connectivity in the store aisle. Today’s ‘showroomers’ can examine a product while in a store, use their mobile devices to find a lower price then leave the store to buy the item elsewhere.

“When two items are exactly the same but another retailer sells it for less, and customers have access to that information, it’s hard for the higher priced seller to hold its ground,” said Sucharita Mulpuru-Kodali, VP and Principal Analyst, Forrester Research, in an interview with Retail TouchPoints. “The stop gap is price matching. Retailers need to seriously consider broad, price-matching policies to retain shoppers that find cheaper prices elsewhere and are prepared to make the switch. Retailers must either lower the price, stop selling that product, or figure out another way to make money.”

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Mulpuru-Kodali pointed to ways brick-and-mortar retailers can offset showrooming, including:

  • Improved service levels;
  • Providing coupons to shoppers that may be “flight risks;” and
  • Differentiating from online-only sellers with fast, easy in-store returns policies.

Ultimately as showrooming continues to evolve and affect the brick-and-mortar channel, “physical store owners need to reinvent their businesses,” said Mulpuru-Kodali, “and prepare for the death of traditional merchandising as we know it.”

Showrooming may now cost brick-and-mortar retailers in the U.S. as much as $217 billion in lost sales, according to 360pi in an infographic posted by Retail TouchPoints.

The trend also impacts brands: “Showrooming affects us because it affects our retail partners’ sales,” said Steve Chang, Director of Business and Product Development for iSkin. “The reality is that with a weak economy and low consumer confidence, the biggest factor influencing purchase seems to be price. Thus, when shoppers become aware of web sites that provide branded products at heavy discounts ― or non-branded, factory direct products at a fraction of what they would otherwise pay ― showrooming causes retailers to lose sales they worked hard to obtain.”

With lower price as the only benefit, “showrooming catapults retailers and everyone else into a price fight,” said Chang. “Unfortunately, I believe this is more of a survival strategy than an opportunity to adapt. When retailers, partners and vendors are forced to compete in a downward-spiraling price war, everyone looses, including the consumer. Product specifications and quality standards are lowered. Quality of service and shopping experiences are diminished. It could get out of control as many parties go out of business, creating an equally negative monopoly state.”

Fighting Back With Customer Experience

Better in-store experiences and solid rewards programs could help counter showrooming. “Consumers still value instant gratification enormously,” noted Chang, “so a good sales team has the potential to convert the showrooming customer.”

Convenience and instant gratification are powerful influences: Data from Forrester shows that “consumers are driven by convenience, sometimes at the expense of price,” wrote Reineke Reitsma, VP and Research Director for Forrester, in her blog about mobile shopping behaviors. “While consumers use the mobile channel to research competitive product pricing while they’re in a store, they often prefer to purchase their desired product off the shelf, even if the physical item in front of them is not the cheapest option.”

Industry experts suggest different scenarios for the motivators of showrooming. Showroomers still purchase in a brick-and-mortar store perhaps to fulfill “a human need for consumption and the immediate gratification gained by purchasing an item and being able to exit the shop immediately,” noted Chaim Katzman, Chairman and Founder of Gazit-Globe, a company that owns approximately 600 shopping centers around the world. In an October 2013 article posted on LinkedIn, entitled Will “Showrooming” Kill Retail?, Katzman added: “No matter how good a web site, how attractive the prices online, or how quick the shipping, e-Commerce offers a fundamentally different experience than the physical act of consumption.”

Nevertheless, the rapid growth of e-Commerce “is forcing brick-and-mortar retailers to reconsider their traditional model and how they view their relationship with an increasingly diverse consumer base,” Katzman stated. “The role of the physical store itself is changing; it is no longer simply the place to purchase goods but a representation of a retailer’s brand. When consumers can purchase goods online from any location, the ability to draw them to a store lies in offering something beyond merchandise.” For example, wrote Katzman, retailers must develop their own apps and online presence that have the feel and look of their online competitors.

“While brick-and-mortar stores need to get smarter, the idea that customers have the product in their hands, but still feel more comfortable going home, finding it online, and waiting for three days to have it shipped, is proof that something is terribly wrong with the model,” wrote Dan Bellia, Product/Industrial Designer for Hointer, Inc., in response to the Katzman post. “If physical stores are going to truly compete against e-Commerce, full transparency of pricing must be out in the open. When a superior customer experience is available for the same price, perceptions start to change. Take Hointer, for example…a physical store where you use your smartphone to shop. Not only are live pricing updates of online competitors presented for each item, but added services like free alterations and in-store stylists start to appear (among others). Essentially, this takes the best of online and physical retail, and merges them into one, smarter experience.”

Nadia Shouraboura, the founder of Hointer and a former Amazon SVP, wanted the Hointer concept to “combine the speed and convenience of the online shopping experience with the in-store experience of touching and trying on your clothes,” she said in a Wall Street Journal article, titled: Clothing Shop is Tailored to Digital Age. Shouraboura added that these digital innovations also “help combat ‘showrooming.’”

Competing With Omnichannel Strategies

Customers expect seamless transitions between online and in-store shopping; therefore, “both retailers and landlords need to adopt online methods to enhance a customer’s in-store service and experience,” added Katzman. Methods can include mobile access to product reviews and price comparisons and location-based and user-behavior customized promotions. Furthermore, “retailers need to develop their marketing strategies to get the best results across different channels…The possibilities are endless and it is critical that retailers embrace e-Commerce as an opportunity.”

Katzman added that the influence of e-Commerce on retail is not one-way and that some online brands have begun to open physical locations, seeking to broaden their brand exposure. “This trend is testament to the need to provide consumers with a complete experience that includes the desired elements of both e-Commerce and physical shopping.”

Heading into the 2013 holiday season, retailers are developing omnichannel strategies that “might eventually put worries about showrooming firmly in the past,” according to an eMarketer report. “One of the key benefits of adopting an omnichannel strategy will be that it sidelines concerns over showrooming,” said Larry Freed, CEO of ForeSee, in the report. Freed emphasized channel consistency: “Make sure that your channels are integrated, so that when that person goes from a web site into a store and pulls out their mobile device, you’re giving him a great experience that makes it more compelling than to go to Amazon.”

A September 2013 article on Businessweek.com, titled: Maybe Showrooming Isn’t Killing Retailers After All, reported that the “savviest retailers” are going a step further to combat showrooming by crafting mobile features aimed specifically at in-store shoppers. “Most notably, Wal-Mart Stores has a ‘geo-fencing’ mobile app that recognizes when a user is physically located nearby. Thanks to the app’s ‘store mode,’ which can serve up hyperlocal deals, the retail giant is now getting 12% of its online revenue from customers who are actually in one of its stores.” Kroger has a similar initiative that lets would-be grocery shoppers find coupons, refill prescriptions, and build shopping lists on their phones.

Part 2 of the Showrooming feature will appear in the Nov. 19 newsletter.

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