CHAPTER FOUR: SHOWROOMING

  1. Showrooming

4.1 Definition

The proliferation of smartphones and tablets has led to an increased comparison- shopping, often when consumers are in stores. According to a Mintel expert (2012), the notion of visiting physical retailers to look at products and try them on with the intention of buying for the cheapest price online describes the concept of “showrooming.” As mentioned by Loller (2014), the little word has emerged in the world of marketing. This has led to marketers decreasing their enthusiasm level in the area of customers touch point in the physical store. Mobile technology according to Loller (2014) has become an integral ingredient amongst the various strategies adopted by the retailers. On one hand this dependency on mobile has led the crowd move away from the physical stores while on the other hand, it provides the customer an ease of shopping at any place and at any time.

Comparison-shopping has become the median for consumers today. A lot of shoppers search for competing prices on their smartphones while shopping in brick- and-mortar locations. Conversely they are also utilizing the brick-and-mortar locations as a way to observe products in person before they buy them online. According to Mintel’s Online and Mobile Shopping report (2011), 52% of consumers said they frequently do price comparisons at home on the internet after seeing a product they want to buy in a store in person.

4.2 Retailers’ Response

Retailers have become aware of the showrooming phenomenon. Some are responding by providing creative on-site offerings and focus on superior customer service in order to attract customers into shopping and buying at physical stores.

This can be seen through the following examples:

Target: In January 2012, Target reached out to its vendors to create new and exclusive products for itself. If the vendors were unable to do so, they were told to discover ways to lower the prices that the brand could forward to their regulars.

This novel scheme is also being used by the retailers today avoid direct price competition. If no other retailer carries the same product, there is no threat of it being available anywhere else at a lower price. However, the product mix has to be unique and exciting enough to generate traffic to stores for this approach to work.

Amazon: Contrary to Target, Amazon encouraged consumers to carry out the practice of Showrooming during the 2011 holiday shopping season through its price check app. This app allowed shoppers to scan a product’s barcode take a photo or search for the item. After this, the app would list its current selling price on amazon.com. To add, during the promotional period, consumers using this app were given an instant discount of 5% off Amazon’s current price. Among the showroomers, 41% did their shopping research at Walmart, while 25% went to Target and 48% made their final purchase at amazon.com (Mintel, 2012).

Nordstrom: Nordstrom is an American fashion retailer who pioneered the concept of ordering online and picking up in-store. This offers the customers ease and also helps draw consumers to stores. This can further lead to them spending more money as they pick up other items along the way with the added plus of seeing/touching items before they buy them. According to Mintel’s Online and Mobile Shopping US (2011) report, 22% of those surveyed said they would only buy clothing in stores. This goes on to develop that whilst shoppers still have the ability to comparison shop as they search for items, the convenience factor might possibly win them over. Additionally, they are guaranteed that a product is in stock and available for immediate consumption in comparison to visiting a store to find out that the product they want is out of stock or search the Internet only to realize the product is no longer available.

JCPenney: Another strategy to fight against showrooming is to create an overall lower pricing strategy. JCPenny has recently launched a new pricing strategy as per which the retailer will be offering a more simplified pricing structure with everyday lower prices and fewer sales rather that offering many sales and promotional events throughout the year. This will help generate traffic to stores fostering them to shop at their convenience and not await the sales. The retailer will also make its customers aware of the sales happenings. This combined with introduction of new brands to provide a differentiated shopping experience offering products not available in other stores might aid retailers to cut down the practice.

4.3 Factors affecting Showrooming

Some of the factors affecting Showrooming are as follows: High Smart phone penetration: In a study on the impact of smart phone penetration and usage in online shopping, Delloite (2012) indicated that more than half of the consumers used their smartphones to compare products while shopping in the physical stores. Portability of these devices and the availability of 3G/4G networks further make it easy for consumers to do the comparison quickly. The leading UK based marketing website emarketer.com (2011) in its study revealed that the smartphone adoption in UK is at an all time high and added add 6.9 million more consumers in the year 2013. This increased the total number of smartphone users to 30.9 million. The figure represents 49% of the British residents and 61% of the total mobile phone users.

Online presence of the retail stores: The incredible rise in the figures of the online sales of the everyday brick and mortar stores during last Christmas using the reserve and collect business model has led more retailers in UK to move towards online retailing. According to a news article published in UK’s The Telegraph, Wallop (2013) indicates that there is a 60% rise among the top 50 retail chains in UK that have adopted reserve and collect business model in their stores. This accounts to 30 more top retailers in UK going online with their products and having a digital product catalogue highly available on Smartphone and tablet PCs. Competition among retailers is fierce. In addition to the changing nature of product selections at various retailers, online retailing is another visceral in itself. All the retailers have a vital e- commerce presence, whereas the prevalence of online-only retailers is conventional.

4.4 Showrooming and Consumer Behavior

(Stock 2013) asserts that the Showrooming phenomenon has become a more distressing word than shoplifting for the conventional brick mortar retailers. The attitudes of the comparison shoppers can be learnt from the AIMIA’s (2013) topical study. This study gulfs them into five different categories.

Exploiters: 6.1% of the show roomers fall under this category. They are the people who are deliberate about the prices and may shift their brand loyalty just for a minimalistic (5-10%) difference in the price at which they can buy the product online. Savvy: 16% of the showroomers come under this category. They are the people who are cautious about the price, but often perusable with additional offers or past shopping experience.

Traditionalists: 30.2% of consumers still want to buy from a brick and mortar store, although they browse and compare products and price options online.
Experience seekers: 31.7% of the consumers value the shopping experience and not just price. These often include product delivery turnaround time, payment options and ease of navigation on the company’s e-commerce portal.

Price sensitive: 19.4% are price sensitive. This genre of showroomers often doesn’t plan their purchases but get carried away with offers and discounts. They often indulge in impulse buying irrespective of brand loyalty or shopping experience.

Consequently, these categories of comparison shoppers will continue to grow, as the end result is that consumers want products when and where it is most convenient for them. However, as they have become increasingly savvy (and the number of tools to help them comparison shop has grown), they are no longer game to settle for the first price that they see. The buyer and retailers both have equal opportunities to exploit this technological advantage. The endless battle between price and convenience will remain. Nevertheless retailers need to be ready to combat with the change in consumer behavior caused through this phenomenon yet serve their ever expanding needs. While the pricing strategy is certain to be a lure, it may simply not be enough for today’s discerning shoppers. This is because of the high technology permeation is the main reason behind the growing trend of showrooming.

Continue on the next page to read about PRIMARY RESEARCH FINDINGS

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I'm an eCommerce Project Director at an agency in London and a consultant for a number of eCommerce start-ups. I founded Think etc 9 years ago which now lets me share my research and experience with all the interesting brands, people, places and projects that I have been privileged to work with. My work on crowdsourcing was published by Oxford as part of a journal article and I have been obsessing over eCommerce and Magento over the past several years.

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