Why Retailers Have Stopped Freaking Out About Showrooming

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Morteza Nikoubazl / REUTERS

Big brick-and-mortar retailers know that everybody is using smartphones when shopping in their stores. And they’re (mostly) cool with it. For one thing, they don’t have much choice in the matter. For another, they’re embracing the idea that the smartphone-enabled shopper can be converted to an on-the-spot buyer.

Five or so years ago, when smartphones were new and few truly understood their potential, retailers barely acknowledged that consumers could browse in stores while using their phones to look up prices and reviews from multiple competitors—before ultimately making the purchase online, likely from Amazon.com. The practice didn’t even have a name at the time, but we now know it as “showrooming.”

By the 2011 holiday shopping season, brick-and-mortar retailers had no choice but to acknowledge that showrooming existed, and that it appeared to be a threat. That’s the year that retailers were up in arms when Amazon unleashed an “evil” promotion that enticed consumers to visit physical stores and zap the barcodes of items using Amazon’s Price Check app. Anyone who purchased the item via Amazon was given a bonus discount of 5% off. It was around this time that several well-known retail chains were struggling mightily or had recently gone out of business. Many wondered if we were witnessing the end of big box store model.

From that point on, brick-and-mortar-based stores began regularly launching strategies to counter showrooming, including pushing vendors for products that retailers can sell exclusively (so there’s no direct competition on price), ramping up one’s own online sales channels, and matching prices from Amazon and other competitors.

(MORE: Price Matching ‘R Us: Another Giant Retailer Says It’ll Match Online Prices)

More recently, retailers and analysts have said that we have moved on to the next step in the evolution of showrooming and “omnichannel” or “multichannel” shopping. By now, everyone must know that showrooming exists. But rather than being considered mainly as a major threat to one’s business model, showrooming is now more often viewed as an opportunity.

“We love showrooming—when Target gets to book the sale.” That’s the perspective at Target, summed up in a recent blog post from Casey Carl, the company’s president of multichannel merchandising. “Pundits and the media have cast showrooming at various times as either a scourge to brick-and-mortar retailers or as a death knell—another proverbial nail in the coffin,” Carl wrote. “However, less publicized is the fact that showrooming is also the greatest opportunity for retailers.”

An econsultancy post advises, “There’s not really a lot anyone can do about showrooming – it’s not illegal and people are always going to compare prices. Retailers need to accept this, embrace showrooming and use it to their advantage.”

Offering in-store wi-fi allows shoppers to browse prices and products elsewhere, and so long as the retailer being showroomed has competitive prices—and perhaps even halfway decent customer service—it has the edge on closing the deal on the spot. A showrooming study from Parago indicates that it’s wise for retailers to price items within $5 of what Amazon charges; 63% of surveyed consumers said that if an item cost $50 in a store but $45 at Amazon, they’d buy from Amazon (assuming the store didn’t offer price matching).

(MORE: Halloween in August? Christmas in October? This Annoying Retail Trend Is Here to Stay)

An emarketer report noted that showrooming “will be less of a concern this year,” partly because retailers have gotten much better at allowing customers to browse and do research seamlessly in-store and on their devices:

One of the key benefits of adopting an omnichannel strategy will be that it sidelines concerns over showrooming. Larry Freed, CEO of ForeSee, a customer experience analytics firm, emphasized channel consistency: “Make sure that your channels are integrated, so that when that person goes from a website 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,” he said.

Another new study, from the Columbia Business School and Aimia, a loyalty program management company, found that mobile-assisted shoppers fit into five categories, such as Traditionalists (who buy in stores but perhaps do some research with their devices) and Experience-Seekers (who put more emphasis on quality and having a great shopping experience, rather than merely getting the best price).

Overall, the study concluded that for the majority of consumers, getting the absolute cheapest price is not the highest priority. “Many shoppers with smartphones care about more than just the lowest price on every item,” said Matthew Quint, a co-author of the study and director of Columbia Business School’s Center on Global Brand Leadership.

(MORE: Best Buy’s Unlikely Return from the Dead)

Using consumer survey data, a Gallup Blog post published this past summer stated that retailers need first and foremost to craft a message and offer products and services that win over customers, rather than simply focusing on showrooming:

Clearly if there is a monster under retailers’ beds, it is not “showrooming.” The real monster under the bed — the real peril — is retailers failing to create a compelling and differentiated brand promise that allows them to engage their customers.

2 comments
Midearth381
Midearth381

No mention in the story of the big push by Big Business to have governments to force Amazon and all other online retailers to pay taxes - that is what gave them confidence - now I get to go to WM and be ignored while unable to buy what I want and they advertised or go online and pay the same price. They just don't get that it is customer service and support that made them unnecessary in the first place and will continue to haunt them until and if they change their ways. It is not just price.

rodmoose
rodmoose

While we appreciate the mention of our show rooming study in this article, we have to disagree with the statement that, “retailers are no longer freaked out by show rooming.” 

This is illustrated by many top retailers’ underperforming earning reports, which indicate online competition is the primary reason they’re not meeting projections.

Our study found the only way to keep 58% of adult smartphone-owning show roomers as customers is to match Amazon’s prices. 

But Amazon’s margins are razor thin and their cost of doing business is cheaper than traditional retailers, so matching their prices long term will shutter most retailers.

So how do retailers beat Amazon?

In our shopper survey we asked consumers: if a retailer matched online prices with a rebate, would you buy from the store over the online competitor?  The majority said they would. This is good news for retailers because rebates provide more margin, including a lower cost to fulfill.

So we would argue that price-match rebates, which are just becoming available, are a realistic tactic for retailers struggling with show rooming, because they are not embracing it.

Best,

Rodney Mason, CMO 

parago