This is Part 2 of the Retail TouchPoints Showrooming report. In this article, readers will learn how Target and Best Buy are using showrooming to their advantage. Part 1 of the report appeared in the Nov. 12th newsletter.
As shoppers continue to use the store to touch-and-feel products, then access mobile devices to compare prices, and finally purchase the items elsewhere, retailers are responding with innovative strategies designed to save the purchase and create a more loyal customer base. A number of leading retailers, including Target and Best Buy, are implementing strategies designed to welcome shoppers committed to showrooming activities.
At Target, fully embracing showrooming means “seamlessly integrating the physical and digital worlds — from products to price matching to personalized offers — to exponentially improve the guest experience,” said Casey Carl, President of Multichannel for Target.
In a September 2013 executive blog on the Target web site, Carl explained how Target is using showrooming to the retailer’s advantage. “Showrooming is a threat to retailers like Target that have a significant investment in real estate and physical stores,” Carl stated. “However, less publicized is the fact that showrooming is also the greatest opportunity for retailers. We recognize that showrooming is part of a revolution that’s making retail more competitive than ever. For retailers to survive and thrive in the future, we’ve got to up our game, play to our strengths and seize the upper hand by enhancing both our physical stores and digital channels…Our stores must offer exceptional experiences [while] our digital channels — our web site, mobile and social platforms — must deliver on inspiration as well as … outstanding value and convenience.”
Carl said Target took a big step at physical-digital integration last fall when the company made free Wi-Fi available in stores. The retailer also too a giant leap in the spring of 2013 with the launch of Cartwheel, a new social-based digital savings program. “We do understand that today’s digitally-connected guest views stores, online and social media channels as one brand experience so we need to think and act that way, too. It’s the future of retail. So we’ll continue to try new things, learn and adapt ― both online and in our stores.”
One example of this commitment is the retailer’s new store-and-online initiative called “Baby 360.” Research showed that new and expectant mothers spend 63% more time researching purchases online compared to the general population, said Carl. Therefore, Target partnered with BabyCenter, a pregnancy and parenting web site, to provide more meaningful content, product reviews and recommendations on Target.com and the retailer’s mobile app. The company is testing a redesigned in-store baby shopping experience and is providing a new service desk staffed by knowledgeable “Baby Advisors.” Advisors help guests navigate store aisles and have the tools to help direct guests to broader product assortments available at Target.com.
“This is all about better serving today’s digitally-connected guests,” Carl stated. “And, to us, it’s showrooming at its finest… We believe showrooming isn’t just a win for shoppers. It’s going to be a decisive win for retailers that up their game.”
Best Buy: “The Ultimate Showroom”
Once battling showrooming by matching prices against rival online retailers, Best Buy now says the chain is “The Ultimate Showroom.” On October 27, 2013, during the World Series, Best Buy launched a holiday TV campaign ― called “The Ultimate Showroom” ― to personalize the retailer by sharing stories of holiday shopping success facilitated by Best Buy stores. The campaign featured four celebrity storytellers, each sitting in a big leather chair with an oversized story book, telling tales of potential holiday shopping nightmares prevented by the “magic” of Best Buy.
“It’s simple: Consumers want the right gifts, at the right price, as easily as possible,” said Scott Moore, SVP of Marketing for Best Buy, in a press release. “No matter if customers select their gifts in store, order online, or use in-store pick up, we know they will enjoy the convenience of Best Buy.”
At one time Best Buy covered product barcodes to prevent shoppers from using their phones to compare prices, according to a story about shopping in The Economist. “Today the retailer’s new boss, Hubert Joly, professes to ‘love showrooming’ because it means that a prospective customer is on the premises.”
Exclusive Products Lure Shoppers
Another way to draw shoppers into stores is by offering exclusive items, according to the 2013 Holiday Outlook Guide, published by Retail TouchPoints. “Brick-and-mortar retailers that provide excellent customer service and also provide some sort of exclusive product, whether it’s merchandise or a service, will draw in customers looking to buy special items, such as limited-edition gifts,” said Deena M. Amato-McCoy, Research Analyst, Retail and Consumer Markets, Aberdeen Group. “Holidays can make or break a retailer’s whole year, so they need to capitalize upon any opportunity that will make them stand out among the clutter and noise in the marketplace.”
According to the Holiday Guide, when the Naperville Running Company told New Balance that online stores were driving independent running stores into decline, the shoe brand created a product exclusively for independent retailers ― one that could not be offered online. “In the midst of rising markets and new channels of communication like social and mobile, brick-and-mortar retailers should not be quick to discard traditional methods of salesmanship,” the Holiday Guide indicated. “Offering exclusive products, providing high-quality customer service and working closely with vendors are tried and true business practices that will still see brick-and- mortar retailers through many more holiday seasons to come.”
Many retailers are jumping on the exclusivity bandwagon. “I think what we're already seeing ― and will continue to see ― is increased emphasis on exclusive product,” said Kristian Chronister, CMO and Chief Digital Strategist at Jewelry.com in a response to Katzman’s LinkedIn article about showrooming. “Much as the mattress industry has long managed to avoid price comparison by keeping particular models exclusive to each retailer, I think we'll see more and more cases where retailers insist on some degree of brand/model exclusivity.”
Rebates Help Counter Showrooming
When brick-and-mortar retailers match e-Tailer prices with rebates, the majority of consumers will shop and buy from those retailers more often, according to a study by parago, titled Dynamic Pricing In A Smartphone World. The parago survey of more than 1,000 smartphone owners found that Amazon is the No. 1 site shoppers use to compare prices when in stores, and that a price difference of just $5 can sway purchase decisions to Amazon. However, 67% of showroom shoppers will buy from a brick-and-mortar store when the Amazon price is matched with a rebate, as reported by Retail TouchPoints.
The study also found that rebates, which provide healthier retail margins than instant discounts, motivated more in-store shopping and buying across all income levels and retail categories. The price-matching tactic can help retailers counter sales continually lost to showrooming, which, the report noted, “increased by 400% over last year.”
More Engaging In-store Experiences
While many believe that customers tend to shop based solely on price, and that showrooming is the ultimate method of doing so, Gallup research found otherwise: “Customers shop based on price when price is the only thing that differentiates competing offerings … when they don’t have an emotional connection to a particular retailer ― when they are not engaged as customers,” stated John Fleming, Gallup Chief Scientist, in his blog, titled: The Myth of “The Peril of ‘Showrooming.’” In fact, “over 90% of all consumer electronics customers in the U.S. feel that no one consumer electronics retailer is the best.” The problem for these retailers is not showrooming, Fleming stated, but failing to deliver a compelling and different brand promise, and then engaging their customers.
“Clearly if there is a monster under retailers’ beds, it is not ‘showrooming,’” said Fleming. “The real monster under the bed … is retailers failing to create a compelling and differentiated brand promise that allows them to engage their customers.”
Whether brick-and-mortar retailers should focus on in-store engagement, exclusive products and/or other strategies that recoup revenues lost to online sales, one thing is clear: Merchandising as the industry once knew it is dying, and showrooming has hastened the change. Brick-and-mortar retailers must recreate their business models, said Mulpuru-Kodali. “Those that don’t do so at their own peril.”
Click here to access a complimentary pdf of the complete two-part Showrooming report.