Truth about Showrooming

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Truth about Showrooming

By Gaurav Pant and Girijesh Agarwal - 11/07/2012
As shoppers ourselves, all of us know one thing is true – the consumer is channel agnostic. She uses online, mobile, social and store channels to search, share, influence and buy. No longer does she follow a linear purchasing process. She  moves from one channel to another naturally and, depending on what she wants to achieve, she gravitates toward the channel that offers her the most value. Is it really surprising, then, that an estimated one in four shoppers used their mobile phones to compare prices while in-store during the 2011 holiday season?  

The specter of lost sales via this visible expression of channel agnostic consumer behavior has attracted a lot of retailer and media attention. It even has been  given a fancy name – showrooming.
However, anyone who doesn’t frame the showrooming discussion in the larger context of cross-channel consumer engagement  may be missing the forest for the trees.

Opportunistic Strategies
In the latest industry research conducted by the Edgell Knowledge Network (EKN) and eBay Local, awareness of the showrooming phenomenon by retailers is extremely high at 90%. More important is the finding that eight in 10 expect it to have a negative impact on sales (averaging a 5% loss) during the 2012 holiday season. The question therefore is: What must retailers do to combat it?

Fundamentally, showrooming is a case of value mismatch between what is important to the consumer and what a typical store or retailer offers. Retailers cannot combat showrooming effectively if the primary value their stores offer is physical and convenient access to products. Beyond the price-benefit equation (which includes the  price difference achieved by buying online and includes any tax savings and shipping cost), the drivers of this consumer behavior are shipping and delivery convenience, product availability and product variety.
EKN’s report “Showrooming’s Impact on the 2012 Holiday Season” outlines recommendations for retailers, taking into account immediate tactical opportunities as well as the longer-term goal of improved cross-channel engagement. Here are some highlights from the report:
  • Match prices smartly and opportunistically. Price-matching needs to go from a policy decision to a transaction value decision – i.e. what is the value of this transaction in the context of the lifetime value of the customer. The only way to get to this level of sophistication is through improved cross-channel execution, Big Data analytics, and an overall shift in how to monetize a store visit. Price matching must also start at home. In fact, difference in pricing between the retailer’s own store and website confuses customers and must be eliminated.
  • Improve delivery options and convenience. Third-party services are an interesting option for retailers to consider, especially if same day delivery is important to customers.
  • Identify and engage showrooming in-store. For instance, if you offer price matching, sales associates must be trained to observe showrooming behavior and approach showroomers with relevant information and offers to help close the sale. License data from price aggregators to ensure salespeople on the floor are always up to date with the latest competitive pricing information.
  • Target showroomers not in your store. Publish product inventory online on your website and mobile app, as well as through third-party aggregators. Use demographic and behavioral data from popular price comparison app providers to make targeted offers to showroomers, especially those shopping at your competitors’ stores.
  • Invest in exclusive product partnerships in certain categories such as toys and games, apparel, and health and beauty. Ensure a balanced product assortment by assessing the vulnerability to showrooming of individual products.
  • Elevate the value offered from your loyalty program to go beyond coupons and discounts by introducing premium services such as local home delivery for elite members.
  • The irrelevance of the store is an exaggerated half-truth. EKN recommends retailers assign the store a clearer role in cross-channel customer engagement and re-design the experience accordingly. The maze-like IKEA stores are designed to immerse the customer in an “inspirational” journey that helps them create ideas. These stores are not designed to optimize traditional customer trip missions (find product easily, head to checkout).

Bonobos, a men’s apparel company, seems to have pioneered the concept of “reverse showrooming.” It is an online retailer that has opened stores in NYC and Los Angeles, and is partnering with Nordstrom to sell products in stores and on its website. The concept? The stores are designed to be showrooms where you can try on your favorite style and size (they have one SKU of each), but all sales are made online. The stores have mastered the challenge of unique product assortment and, therefore, they effectively combat the showrooming value proposition.

Regardless of how best to approach it, retailers must consider the one truism of showrooming – the customer is in the store with intent to buy. The key is getting her to buy from you.

For the full report, Click Here.
Gaurav Pant is research director and Girijesh Agarwal is director of communities, both for the Edgell Knowledge Network. For a full copy of the report visit