showrooming or when smartphone users go on free rides

                In the ever-growing highly-competitive business environment, change is often spelled as challenge. And back in 2000, change came in the form of box shaped, extra-large retailer shops, with a devouring appetite for mom and pop businesses. Sure enough, it nearly took local businesses off the map, forcing most of them to close their stores when faced with the discount-capable, mass-producing mastodons. Then customers briefly deplored the impossibility of making emotional ties with these new and rather impersonal actors on the market, but what the retailers lacked in endearment, compensated in best deals that even the most skeptical of clients found hard to refuse. Nearly a decade and a half later, these mean production machines met with what appears to be either a contorted form of market bounce-back or poetic justice because, as it turns out, the next best thing in shopping is shopping elsewhere.

infographic from Data Points

With the rise of smartphones a new pattern emerged. Showrooming, or the practice of prospecting the merchandise in a traditional brick and mortar retail store in order to purchase it online at a lower price, is steadily on the rise and it had already taken its toll amongst the big retailer shops out there. According to a Time’s Bussines & Money 2012 release[1], when the phenomenon of showrooming started showing up in customer behavior studies and surveys, Best Buy had a net income tumble of 25% when compared with 2011. Showrooming was happening and it was very much out there.

The first instinct was to cut this bad weed before it spreads, but as it turned out, that was easier said than done, since there is nothing illegal about browsing for the lower fare. So while shoplifters couldn’t get away with the goods they stole, the people at the end of the aisles busying themselves with price fishing could simply walk free and purchase elsewhere, even though the business managers felt cheated.

Showrooming = the practice of prospecting the merchandise in a traditional brick and mortar retail store in order to purchase it online at a lower price.

Data started piling up on the new trend: in April 2013, BBC labeled the practice “perilous” for businesses; citing research by the design agency Foolproof, BBC stated that 24% of people showroomed while Christmas shopping – and 40% of them took their business elsewhere.[2] Thus, the news weren’t good.

By June, Gallup published its own research on the matter and it looked somewhat less grim. Their study showed that “fully engaged” customers — those with the strongest rational and emotional connection to a particular retailer — and “actively disengaged” customers — those with the weakest rational and emotional connection — have drastically different in-store purchasing behaviors.

  • Actively disengaged customers were nearly twice as likely as fully engaged customers to leave without making a purchase on their last visit, 19% vs. 10%.
  • Fully engaged consumer electronics customers, on average, spent $373 during their last visit, compared with an average of $289 for actively disengaged customers. That’s an increase in spending of 29% compared with what actively disengaged customers spend. 
  • Fifteen percent of fully engaged customers who did not purchase anything said they intended to or had already purchased the item at a competitor’s store, compared with 63% of actively disengaged non-purchasers. 
  • There were no differences between engagement groups in their intention to purchase items online. In all cases, it was 1% or less.[3]

According to Gallup, the problem was elsewhere:

Clearly if there is a monster under retailers’ beds, it is not “showrooming.” The real monster under the bed — the real peril — is retailers failing to create a compelling and differentiated brand promise that allows them to engage their customers.

And isn’t it ironic to see that at the very heart of the issue Gallup found the one thing that local businesses had and exerted so well – the power to engage customers and to offer them a unique experience?

By September2013, retailers had enough to start building up their defenses, so much so, that Time’s Business and Money edition issued a less alarming article on the matter, suggestively entitled Why Retailers Have Stopped Freaking Out About Showrooming[4].

While dropping the initial plan of charging extra fees for browsing, retailers decided to embrace the change and adapt and by November 2013, a Morningstar analyst, R.J. Hottovy, cited by NBC News, noted that It’s probably going to be a little bit better year for Best Buy (…)They’ve been finding creative ways of bringing people into stores like promotional periods for hot products, discounts or trade-in programs.[5]

amazon vs brick and mortar stores

The trouble is that while such techniques are readily available for big shops like Best Buy or Target, the price to pay is too steep for businesses that don’t make the cut by issuing a new model, or by discounting last year’s edition. And where the retailers manage to pull themselves out of the tar pits, the booksellers seem rather stuck, on both sides of the pond.

“People don’t want to “buy online”, they want to “buy cheap”. And the books aren’t getting any cheaper from a meat-space bookstore. We have bills to pay, employees to pay, books to buy. We’ve adapted by giving up on our attempt to attract customers who only care about price, and focusing on customers who are willing to pay for the extra services we offer” said Charlotte Ashley, a writer and bookseller from Toronto, Canada.

In Europe, things don’t look any better: booksellers everywhere find it hard to keep up with the online competitor, and showrooming is viewed as a plight or, at best, a difficult challenge to take on.

Everyone fights it differently: some bookshops back in Bucharest, Romania, offer their potential customers a full experience, with reading rooms and well stocked tea selections to please even the most pretentious of noses. While further north, a Brussels second-hand bookshop offers its customers the opportunity to sit down and grab a bite to eat at the restaurant downstairs.

All these developments show businesses that are struggling to create a cozy unique experience, one that their customers wouldn’t be tempted to browse for elsewhere.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s