Is “showroom” shopping really such a threat?

Best Buy’s stock price erosion, which you can see in this stock chart covering the last three years, has been the subject of a lot of business press lately. Typically, no one reason can account for a company’s slump, but in this case, one problem crops up time and again: “showrooming,” or the consumer practice of evaluating merchandise at a brick-and-mortar store and then doing price comparisons in that category – high definition TVs, for example – often in the store itself to get the best deal. The traditional retailing sector has taken notice. Could Best Buy’s decline be interpreted as a canary in the mine?

If retailers don’t respond, the answer almost certainly is “yes.” Though the number of shoppers using their mobile devices in brick-and-mortar stores to find the best price on merchandise remains relatively small, it is increasing, and it represents the next stage in the battle between virtual and physical retailing. With high price consumer electronics and an ever-increasingly savvy customer base, Best Buy is a logical first victim of this trend. The pressure on companies like Target, Walmart, JCP, Home Depot, Kroger and many others to avoid Best Buy’s predicament is enormous, and you can expect to see each of them come to market with various solutions designed to get in front of the problem.

If they respond effectively, traditional retailers can turn fortunes in their favor. After all, smartphones represent both an opportunity and a threat. Nearly all the big box retailers have active and growing e-commerce units. Putting the power of smartphones, e-commerce, and physical location together can not only save brick-and-mortar retailing. It could propel new growth.

Let’s look at how these attributes could work for the industry. If I were advising these retailers, I’d remind them of these four, specific, and considerable advantages over online sellers, including:

  1. Instant gratification: with tens of thousands of SKUs, stores can deliver most of the merchandise customers want immediately. Online purchasers are accustomed to paying a premium for overnight delivery, but that still can’t match coming home from the store, goods in hand.
  2. Customer data: not only do retailers have more customer data than practically any other industry in the world. Their stores have the power to pinpoint the location of customers inside their walls and make it easier for them to find what they want quickly and easily.
  3. E-commerce options: if a customer can’t find the item in the store, or if its price invites online comparison shopping, physical retailers have the power to preserve the sale, even if a customer goes online to price shop.
  4. Shopping is fun: online retailers have thus far failed to match the enjoyment that comes as a result of the opportunity to handle the merchandise before buying.

With these strengths in mind, look for retailers to link with technology companies to meet the smartphone shopper head-on with the any of the following innovations:

  • Personal shopping apps: imagine entering a Macy’s and receiving an offer to download a shopping companion app that would allow customers to verbalize to the app what they’re looking for and to offer coupons and promotions in return. An audible interface would enable even techno-neophytes to engage their smartphones for information about the in-store experience.
  • Guidance to the goods: with precise customer location information and inventory data, the app could walk customers to the right aisle and shelf to find what they’re looking for.
  • Pricing to win: physical retailers’ ability to let customers leave with the store with their merchandise entitles them to charge a premium. They need to rethink their pricing strategy by considering online pricing of the same item, but with overnight shipping included. That’s the best, apples-to-apples price comparison. Physical retailers can win if they remind customers that they can pay X in-store and get the item instantly, or X- to buy it online, but probably X or even X+ once shipping (and dealing with courier risk of loss or delay) is included. I’d go so far as to show customers how much they’d have to pay with shipping to get the same item online because it would reinforce the premium value associated with instant gratification.
  • Online purchasing options: consumers can’t find the merchandise they want in-store? By funneling customers to a smartphone shopping app or mobile website upon entering the store, a retailer can anticipate situations when a customer may seek an item the store does not have in stock. That gives the retailer the opportunity to proactively present the consumer an option to buy online before the customer faces the disappointment of finding an empty shelf, a disappointment that is often the gateway to shopping at competitors online stores. It also would allow the retailer to offer vendor or store promotions and coupons.

I’m convinced we are on the brink of a major shift in shopping, but not in the direction many others seem to expect. Brick-and-mortar stores have tremendous advantages. If they embrace the competitive threat they face and leverage technology and all their assets, they can turn the tables on these online retailers and once again establish their dominance.

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5 comments

  1. […] provide store visitors with digital experiences that enhance their shopping. You can find that post here. Well, it looks like Wal-Mart has gotten the message. Read this story in the Wall Street Journal […]

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  2. […] months ago, I wrote about the challenges and opportunities brick and mortar stores have in a world increasingly connected by mobile devices. Customers have […]

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  3. […] this new tech promises to give brick and mortar stores tools to fight showrooming and offer customers more targeted deals, all while collecting data that would send market […]

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  4. […] my very first blog post, back on Nov. 8, 2012, I invited readers to look at Best Buy’s troubles. You could have bought […]

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  5. […] wrote asked a question that was urgently relevant for retailers and mobile marketers at that time: is showrooming such a threat? (“Showrooming” describes the act of comparing online prices while in brick and […]

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