Retailers globally are terrified of being turned into “showrooms” for their online competitors. And their fear is real. Research firm Gartner reported that global mobile payment transactions will surpass $171.5 billion this year, up from $106 billion last year. And that’s just mobile payments and doesn’t begin to touch overall online payments. The increase in mobile commerce is keeping pace with the growth of online purchases in general, but it is the use of smartphones that has allowed showrooming to mushroom worldwide.
Simply put, showrooming is the practice of a buyer coming into a brick-and-mortar store, finding the product they want, taking pictures or scanning it, and then leaving to buy online at a lower price. Best Buy has long been used as the prime example of how a brick-and-mortar store became the showroom for, in this case, Amazon. Amazon, with no brick-and-mortar overhead or expensive sales force, doesn’t have to contend with many of the issues of the retail shop owner. Amazon, like many online retailers, is not a merchandiser or a merchant. They are distributors, and as such, approach their business much differently than the retail store.
The fact is showrooming is not going away any time soon. It will continue to grow. How retailers prosper, or survive, in this new retail landscape will depend upon how they respond to their customers’ needs. If panic sets in, according to Wes Shepherd, CEO of online intelligence provider Channel IQ, “In the extreme, retailers will implement lasers in the store to break up handheld scanning apps from reading.” Not exactly adhering to the old adage, “The customer is always right” when the customer becomes the retailer’s enemy.
Not everyone is concerned about showrooming. In fact, some see it as a positive for retailers. Brian Walker, VP of e-business and channel strategy for Forrester Research, Inc., speaking at this year’s Internet Retailer Conference and Exhibition, said, “It’s not about price.” Rather, he says, smartphone-toting customers in stores are looking for more information. His assertion is supported by several surveys showing that more and more people are going online to research a product before going into a retail store. This may well be true in many retail categories, but try telling that to an electronics retailer selling largely commoditized products like TVs, where price reigns supreme. In this arena, showrooming has had a lasting impact as major chain retailers like Best Buy are seeing the sales of consumer electronics decline. Best Buy’s consumer electronic sales have declined 4.9% so far in 2012, preceded by a 5.9% decline in 2011, even as prices continued to drop.
What showrooming has brought to light is the harsh reality that the retail store experience is changing faster than it has in decades, thanks largely to advances in technology. For brick-and-mortar retailers to survive they must change the way they currently operate.
Consumers used to see the different retail portals as more separate entities. There was the store, the website and the customer service center. If a consumer had a bad experience on the website, they didn’t necessarily associate it with the actual store. This is no longer the case. Today’s retailers have many different touch-points. Some consumers are assisted in the traditional brick-and-mortar store and some use self-service options, but they are all technologically enabled, including the web, smartphone, tablet, cash register and service center. Retailers must begin to think of the overall experience because consumers no longer separate a retailer’s store from its website. If they have a bad experience in any channel, it affects the entire business. Merchants need to consider the consumer from every touch-point to ensure a consistent brand experience across all channels. This complicates how to deal with showrooming, but it also provides new avenues for merchants to prosper.
If you’re going to create a retail experience that’s 100% self-service and hands off, then you’re going to be exposed to showrooming. Retailers need to use their innate advantage of immediacy and intimate customer service to win the showrooming battle. In this anywhere, anytime cross-channel commerce world, it is essential for retailers to learn everything they can about their customers’ desires, buying habits—both purchases and returns—to build a profile of the customer so they can anticipate what they may want based on history and point out merchandise based on previous purchases. With so many channels to manage, there are more ways to lose a sale. Merchants need to build an effective order management system that connects all channels and serves as central repository for cross-channel commerce. This will give the merchant a holistic view of customer activities across all channels.
More advanced retailers are arming their store associates with smartphones or tablets that allow them to bring up a customer’s history in seconds and tailor their presentation to the customer’s known preferences. For retailers to profit in this showrooming environment, it’s more important than ever to create a personalized experience for their customers.
What other steps can a merchant take to mitigate showrooming? According to Michael Fox, president of M&M Paper Company in California, Making sure employees are trained as sales people, not just clerks, and having them stress to customers the benefits of buying locally and walking out with the products in hand rather than paying for shipping and waiting for delivery, and then dealing with the hassles of long-distance returns.
Working with suppliers to provide exclusive product mixes that they don’t promote online enables retailers to offer a more exclusive product mix on store shelves. Small retailers that hand-pick specialized items to appeal to their specific customer base have a much greater chance of selling out quickly than a merchant selling commoditized products. In addition, pricing aggressively can help narrow the gap with online competitors. Allowing sales associates to match online prices, including shipping, can sometimes keep customers in the store, and keep them loyal. Loyalty programs have been effective, but should be targeted to your known customer base.
One overlooked differentiator merchants should carefully consider is the showroom itself. This can be a very strong asset in creating a truly personalized, service-oriented, customer-centric retail store.
Showrooming will not go away, but savvy merchants know they still have the advantage of personal service. And, when exceptional personal service is combined with an effective order management system along with some creativity, even the smallest retailer can succeed.
Brian Kinsella, a Senior Director in Manhattan’s Product Management organization, is focused on defining next-generation cross channel commerce enterprise solutions. In this role, Kinsella has sole responsibility for defining product direction for Manhattan’s order management and reverse logistics management products and co-managing Manhattan’s order management Professional Services organization. Over the course of the last eight years in this role, Kinsella has worked directly with many of the top 100 retailers to help them define and deploy their cross channel roadmaps. Prior to his 10 years at Manhattan, he spent five years in the logistics and distribution practice at PwC.