The retail term “showrooming” got a lot of attention in early December, when Amazon offered special discounts encouraging shoppers to use brick-and-mortar stores merely as showrooms, allowing consumers to scope out items in person before ultimately buying them at cheaper prices from Amazon.com. For obvious reasons, physical retailers want to put an end to showrooming. Now, one retail giant (Target) is showing how it’s going to fight back.
By now, consumers are more than comfortable doing much of their shopping on the Web. Shipping is often free, and most people are no longer scared to type a credit card number into a website. The net result is that, compared to shopping in person, online shopping almost always saves time, and because of how competitive the marketplace has become, often saves money as well. It’s not surprising, then, that online shopping purchases grew by 15% over the 2011 holiday season, dwarfing the solid, sub-4% increase in brick-and-mortar shopping.
There’s one aspect of the physical shopping experience that’s still far superior to its online counterpart, though: Shopping in person is a physical experience. The consumer gets to touch the merchandise, and look it up and down up close. No matter how many photos of an item on a website, no matter how extensive the description, and no matter how many customer reviews are there for your perusal, buying online always comes with a higher degree of guesswork than buying in person.
To eliminate much of the mystery, shoppers have been known to examine merchandise in person at a brick-and-mortar store, and then, if and when they’re convinced it’s what they want, buy it for less from an e-retailer such as Amazon.
The Wall Street Journal reports that Target, for one, is battling back against such showrooming practices. Last week, Target sent a letter to vendors asking for their help in the struggle. The note suggested that vendors create new products that would be sold exclusively at Target. That way, it would be impossible for consumers to comparison-shop the item—which wouldn’t be sold by any other retailer.
If that’s not possible, vendors are being asked to help Target figure out ways to lower list prices charged to consumers. The most obvious way to accomplishing that goal is to lower the prices Target pays to the vendors, a scenario vendors obviously won’t like. The letter, signed by Target executives, reads:
“What we aren’t willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands.”
On the one hand, nearly all retailers love online shopping because of the doors it opens into consumers’ wallets. That is, with the rise of e-retail, shoppers stopped being restricted to making purchases only when store doors are open. Shoppers can now spend 24/7, and since most items are shipped from enormous warehouses, everyday brick-and-mortar problems such as having limited merchandise in stock are minimized.
On the other hand, the Internet and price-check smartphone apps have made it easier than ever for consumers to comparison-shop and find the lowest prices. Retailers have no choice but to compete on price, and so charging a premium on mass-produced goods becomes all but impossible.
One way to avoid having to compete on price is by avoiding direct competition entirely. Every major retailer seems to have designs and products that are “exclusive” to its stores. They foster these brands and products not only because they think consumers love the idea of being in on something “exclusive,” but because when a store has a monopoly on a particular product, it can charge whatever customers will pay, without being worried a competing retailer will undercut it on price.
Toys R Us, for instance, has a slew of products that can only be purchased at Toys R Us stores or the retailer’s website. Target works with many fashion brands, such as Missoni and Jason Wu, that create items for sale at Target and Target only.
But the “exclusive” strategy may ultimately come up short in the brick-and-mortar battle against the e-retail tide. The WSJ notes that it looks like Amazon will almost always be able to beat the likes of Target on price for most merchandise because Amazon pays less for overhead and allows cloud data storage and other profitable parts of its business to subsidize the retail side:
“The traditional retailers are still doing business the old way while Amazon has reinvented the model,” says Sucharita Mulpuru, retail analyst at Forrester Research. “Wal-Mart and Target are willing to sell a few things at a loss. Amazon’s whole business is a loss leader.”
Most consumers don’t really care how, or even if, a retailer makes money. All they care about is which one has the best products at the cheapest prices. The ideal situation is one in which they can inspect merchandise in person, and then buy it at the cheapest price without having to schlep it to and from the car, and without having to pay extra for delivery. This all points to why it’s so hard to compete with Amazon.