Comparison shopping has been around since the dawn of commerce. Before the web, people purchased books, read magazine reviews, scanned circulars and visited multiple stores before making a big purchase.
The combination of the Internet, smartphones, free shipping and returns, and low or no taxes — think Amazon —makes comparison shopping easier and more convenient than ever. This combination has also led to the practice of “showrooming” – browsing merchandise in a brick-and-mortar retail store, only to search online for the same product and then purchase it elsewhere at a lower price.
Numerous studies have found that more than half of consumers check their smartphones to see if there is a better price before making a purchase in a physical store. And according to Parago, 92 percent of smartphone comparison shoppers chose to visit Amazon and 84 percent turn to Google. A price difference as small as $5 will often motivate this shopper to flee the store and buy online. Harris Interactive found that not only is Amazon the go-to online destination for showroomers (57 percent), but Best Buy (66 percent), Walmart (69 percent) and Target (72 percent) are the biggest showrooming victims.
The effects of showrooming aren’t only confined to big box retailers. Even e-commerce sites find that users will browse before eventually purchasing from Amazon or another vendor.
So what are retailers doing to combat showrooming? One shop owner in Brisbane, Australia is charging consumers a $5 browsing fee that is deducted if the consumer purchases from the store. This seems a bit misguided; however, there are plenty of other strategies that businesses are implementing today to combat showrooming.
- Price-match guarantees – Several big box retailers offer price-match guarantees to compete with online competitors. For retailers, the true power of a price-match guarantee lies in the way they make stores seem generous without necessarily requiring price matching on a broad basis – approximately five to ten percent of consumers actually take advantage of such an offer. The danger is that price-match guarantee programs are difficult to manage – the discretion to match or not is often left to store workers, and shoppers can complain if they don’t get the deal they’re expecting.
- Price optimization – Like price-match guarantees, price optimization enables the retailer to compete on price. Unlike price matching, the burden is not on the consumer or the cashier. This approach uses advanced analytic software to address questions like: Is this an item that is easily purchased online? How does the competition price the product? Is there a shortage? At what point does the retailer break even or earn a profit? Could this be a loss leader (a product sold at a lower cost to stimulate sales of higher-margin goods)?
- Exclusive items - Retailers and manufacturers are working together to deliver unique merchandise that is only available in the retailer’s store, or provide mass customization services. For example Toys “R” Us boasts over 20 exclusive brands. Many brands now also offer configurable products such as Nike and Reebok with configurable sneakers, Hallmark with recordable storybooks, and MiOEnergy with specialty sports drinks. Customization isn't only about allowing consumers to design a product but can also be a way to filter options (hundreds of them) down to a handful with a better chance of being enjoyed – and purchased again. Forrester recently reported that 35 percent of shoppers are interested in customizing product features or in purchasing build-to-order products.
- Exceptional customer experience – One in four consumers says that they will share their personal information with a trusted brand online. Why? Because they get something out of a more personalized relationship with their favorite brands. While some customers always go for the lowest price, others are motivated by quality, service and convenience – the foundation of customer loyalty. Mass customization plays to customer experience, as do highly personalized and quality services.
- Embrace showrooming – Retailers are improving the links between store inventory, website and mobile phone apps. For example, Walmart is working on a technology called the Endless Aisle that will let shoppers immediately order from Walmart.com via smartphone if an item is out of stock.
What do these strategies have in common? For the most part, acknowledging the behavior and embracing technology to address it. Showrooming shows no signs of being on the decline. Retailers need to embrace multiple tailored strategies in order to stay relevant, competitive and profitable.
