Showrooming: what it is and what retailers can do about it
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Technology is changing the way consumers behave. They are more active on social media and mobile devices. They are more tech savvy and they will continue to grow more so. Facebook has over a billion users and over 50% of American adults own a smartphone. Buyer behavior has shifted as consumers increasingly use social media to share product recommendations or use their smartphones to check prices. Showrooming is one such trend that has been become increasingly prevalent. How can retailers stay relevant in this environment when the rules have changed?
What is showrooming and who’s doing it?
Consumers use showrooming to check out products in traditional brick-and-mortar stores and then order them online at a lower price. It’s usually seen on higher commitment products that are above a certain price threshold. A recent study from Omnico revealed that one in ten consumers have used their phone to purchase a product from an online competitor while present in the actual store.
The study “Showrooming and the Rise of the Mobile-Assisted Shopper” conducted by Columbia Business School and Aimia showed that, contrary to what you might think, the demographics of mobile-assisted shoppers (or “M-Shoppers”) are quite broad. The data above were extracted from this study. A fifth of all consumers use their phones while shopping in stores to make purchase decisions. The gender distribution is fairly even, as is the 64-and-below age distribution among M-Shoppers. ￼￼
￼How are they doing it?
￼￼It’s all about accessibility. Amazon even has a mobile app for checking prices, which allows you to comparison shop, share the in-store price with Amazon (a smart move on their part to collect more data while they’re at it), and purchase the product directly from the app. Their app is just one of many similar ones. Online retailers can leverage pricing as ￼a huge competitive advantage, especially if they have adopted a loss leader type of pricing strategy like Amazon. Of course not everyone has the cost structure to support this strategy, but overhead for online retailers is lower, which allows them to offer more competitive pricing. The difference is that now consumers have quicker and easier access to this data. ￼
￼Why are they doing it?
Note that two of the main drivers are lower prices (69%) and free shipping from the online retailer (47%). ￼￼￼
￼What does this mean for retailers?
Retailers fear they will become nothing but a step of a competitor’s consumer buying funnel. The potential loss in sales and inability to price match are huge concerns, especially with the higher costs associated with running a brick-and-mortar store. Certain product categories are especially susceptible to showrooming, such as electronics and appliances, as Best Buy can surely attest to.
What can retailers do to combat it?
Keep calm and carry on. Showrooming doesn’t have to mean the end of traditional brick-and-mortar retail.
The good news:
- ￼￼Price comparison isn’t the only thing consumers are using their phones for. Often they are searching for product information, user reviews or coupons, or asking for advice from friends and family.
- They are nearly as likely to use the store’s own website (70%) as another website (75%) to gather product information.
- They are also just as likely to use the store’s own mobile website or app (22%) as a competitor’s website or app (22%) when they choose to purchase online while in a store.
- Consumers may still choose to purchase in-store despite finding a lower price online due to convenience, urgency and immediacy.
- Consumers do not purchase solely based on price.
Retailers can add value through:
- Online product reviews and product information
- Loyalty programs
- Discounts and exclusive in-store offers
- Upping the convenience factor (free delivery)
- Engaging the consumer and collecting feedback though social media
- ￼Elevating the in-store experience (special events, customer service, return policies) ￼
- Overall cross channel integration
- Integrating the mobile experience (mobile checkout)
- Integrating the online and in-store experience ￼￼
Countering this trend by simply slashing prices will likely be a losing battle. Retailers must find creative ways to offer value to consumers that online-only stores cannot, or embrace the showroom concept by integrating their web and in-store experiences. For retailers who operate in both channels, this could present new opportunities to create value. Target is a great example of this. They offer exclusive products that can be showroomed in their stores and are made available for purchase on their website. Consumers can get the best of both worlds — the convenience of online shopping and the ability to see the product in person pre-purchase. The future of retail may be more of a convergence of the two rather than a war between them.
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