Retail Wars 2. Showrooming: Threat or Opportunity?
Showrooming—the bane of brick-and-mortar retailers' existence... or is it?
In our previous article we discussed how consumers are making an increasing use of their mobile devices as part of their retail experience. It started a few years ago, when shoppers were visiting Best Buy, Target or a similar outlet to inspect the goods, and then buying them on Amazon, using "Amazon Price Check" on their mobile to compare prices. Showrooming was the word coined for this behavior.
Showrooming - The practice of looking at something you want to buy in a shop and then later buying it online, usually at a lower price (from the Cambridge Advanced Learner’s Dictionary & Thesaurus © Cambridge University Press).
For those of you fortunate enough not to have encountered this term, and those of you who have suffered its onslaughts, but did not know there was a word for it, showrooming is viewed as a major threat to bricks-and-mortar businesses. Your previously loyal customers visit your stores, examine your goods and then go home to buy the item they want online. It can be worse than that; they do not even leave the store and buy it online using their mobile phone.
When this phenomenon was first noticed (the term was coined in 2010 by retail analysts), owners of businesses that depended on physical stores went into a deep depression. It seemed likely that their businesses would dwindle to a point where they would have to close down. Opening your own online store in retaliation did not help much either. While you could reduce the impact of your competitors, you were still cannibalizing your physical business.
Why Do Consumers Showroom?
When this phenomenon was first observed, there was a great deal of hype, which seems to have subsided in the last couple of years.
A comprehensive report on showrooming was published by Columbia Business School and Aimia in 2013, based on a study of 3 000 consumers in the US, UK and Canada. This study explored the myth that showrooming was largely Millennials’ preoccupation; 75% of respondents who were using their mobiles while in-store were 30 or older. These shoppers (called "m-shoppers" in the study) also made up 21% of the total visitors to the store. It was remarkable that many of the m-shoppers were using their mobiles for accessing product information and reviews, finding discount coupons or even consulting friends and family. This often resulted in purchases being made in-store. Showrooming purchases were limited to 12% of the m-shopper population and were generally made by 2 segments whose first concern was price.
The main reason why shoppers turned to online shopping after visiting the store was poor customer experience. In a 2012 article, Larry Downes explains why Best Buy's days were numbered (this is why hindsight can be so entertaining). From inaccurate information, via a confusing store layout to ignorant and pushy sales clerks, a visit with a friend resulted in two irate men exiting the store. It seems that Best Buy is receptive to criticism, and listens to its customers, because 2016 was a very good year for the store. Most of the gains were from online sales, where Best Buy is taking a leaf from Amazon's book. Best Buy themselves attribute their success to the "improvements in its digital customer experience."
Why Do Mobile Shoppers even Need a Store?
More recent examination of how 13,000 consumers shopped globally by Nielsen indicates that showrooming is here to stay, but so is bricks-and-mortar shopping. The report contrasts behaviour when buying durable goods versus consumables, and notes that there will always be issues about buying online where factors such as fit, sell-by date, brand and sizing are relevant. In these cases, consumers want to inspect the goods themselves, which is not possible in the online store, whatever device is used. Approximately 70% of respondents cited the inability to examine the goods using some or all of their 5 senses as their main reason for not buying online. This applies especially to consumables, where freshness and quality is key. While these trends were strong in developing countries, surprisingly the highest percentage of respondents who needed to inspect an article before buying were in North America (80%).
A clear evidence of the continuing need for an in-store experience is Amazon's move to bricks-and-mortar, like Amazon "Fresh" stores that sell consumables. The competition between physical and digital stores is not as straightforward as we were led to believe.
Mitigating the Showrooming Trend
Where consumers were contemplating showrooming, the main factor favouring the physical store was the immediate availability and convenience - they could take their purchase home then and there. This was reinforced by shipping considerations of time and cost that could be incurred if buying online. The existing trust-based relationship with the local retailer often influenced shoppers, especially with respect to returns, maintenance and repairs. A respectable 20% of consumers expressed a desire to buy from their local store. Even where they did showroom, over 20% still bought from the same retailer via the online store.
These findings give clear indications on how to reduce attrition via showrooming. These are the key actions retailers should take:
- do not fear the threat, welcome the opportunity to interact with the customer via their mobile while they are in-store
- make sure the interaction is seamless and versatile by implementing an omnichannel approach
- provide excellent bandwidth/wifi in-store to enhance the experience
- augment the in-store experience with great and responsive service
- build a compelling app that outshines the competition. If the retailer lacks the capacity to do this, they can outsource to a reputable mobile app developer. Not only will an experienced company deliver a great solution, they will also make recommendations as to what will be needed to engage the customer and how it should be presented.
It would appear that this was Best Buy's strategy, and it worked.
Acknowledging Showrooming: Vaporfi
Vaporfi, a subsidiary of the US-based International Vapor Group (IVG) is run by the canny Nick Molina. While the vaping industry is predominantly online, Vaporfi have built a very successful franchise network which sells only Vaporfi products. Nick used his expertise gained in the mobile market to build a highly successful business model that combines an online store and bricks-and-mortar experiences. In recognition that there will be online sales occurring in a franchisee's territory, Vaporfi pays a commission/profit share to the franchise for these sales.
The franchise stores are great places to be, with informed and superior service, so, while the customer can showroom, buying in-store will enhance his or her experience and provide ready expert advice to the novice, which is part of the franchise training.
Webrooming: the Other Side of the Coin
As showrooming is not going away, you must devise strategies that both mitigate its impact on your physical business and capitalize on the benefits it can bring to your digital business. While this might seem at first sight to be a hopeless task, let's consider another word in the retail vocabulary.
Webrooming - The practice of looking at something you want to buy online and then later buying it in a shop (from the Cambridge Advanced Learner’s Dictionary & Thesaurus © Cambridge University Press).
Webrooming is also known as reverse showrooming. The advent of the mobile phone had surprising benefits for bricks-and-mortar businesses. The SoLoMo (Social, Local and Mobile) customer uses his or her mobile phone to find local businesses offering services and products they require. Here we have the exact opposite of an shopping behaviour. Customers do all their research online, compare features, pricing and availability of products, make a decision and then come into a physical store and buy the product they want.
This was identified in a research carried out by ComScore and Neustar on how 2,000 US consumers were using their devices for local searches via search engines, electronic and printed Yellow Pages, and print media. A half of these searches were executed via mobile and 54% of all searches resulted in a visit to a local store in close proximity (less than 20 minutes) from the consumer's geographic location.
This study emphasizes how important it is for the retailer to have store info with decent SEO ranking on the web, whether it is a proprietary website or coverage in a search engine and/or other media, such as store directories. The customer is looking primarily for store opening hours (77%), ratings and reviews (51%) and special offers and coupons (42%), using online maps such as Google for location details. Other information, such as parking availability, is also important.
The digital marketer can take advantage of this trend by developing an app that supplies all the details required by the customer. A Swiss company, Tipiness, provides a B2C service via a mobile app for subscribed group buyers. This service provides information on deals which the customer can enjoy at stores near his or her current location via an iPhone app.
Realizing the Benefits of Both Showrooming and Webrooming
While there will always be shoppers who showroom consistently, they are in the minority. Understanding what the bulk of customers are looking for at retail outlets is the first discovery a successful company must make. Customer experience should be delivered via an omnichannel platform where shoppers can use their desktop at work, a laptop or tablet at home and a mobile phone on the go to get the information they need. This should be a blend of rich product data, store info and loyalty rewards, such as special offers. The customer relationship data used to identify what is packaged and delivered to the shopper's device should be as intimate, targeted and predictive as possible.
No longer is the customer lumped into a "segment", their unique needs and tastes are recognized in what is displayed on their device of choice. As Mike Cassidy says "Webrooming, Showrooming? Customers just want a seamless retail experience".
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