Retailers Fight Showrooming
Arsenal includes basic strategies and social mediaApril 25, 2012 By Bob Ankosko
A customer walks into your store and heads for the TV displays. He’s on a mission and spends the better part of an hour drilling the TV salesman on the pros and cons of a half-dozen big-screen sets, moving from one TV to the next. Eddie doesn’t hide the fact that he’s ready to buy and narrows his search to a 50-inch LCD.
He thanks the salesman for his time, and as he’s walking away pulls out his iPhone and slips into a corner to see if he can find a better price online. Amazon has the lowest price but the model is also on sale and in stock at nearby competitor. Eddie walks out and heads to the store just down the road to buy the TV.
Price shopping has been around as long as retailing but the practice of “showrooming”—a customer checking out products in the store and using his smartphone to search for a better deal, in some cases scanning barcodes—is a relatively new and growing trend that’s making brick-and-mortar retailers nervous.
Smartphone Shopping on the Rise
The mobile Web, and smartphone apps in particular, have transformed shopping, making it easier than ever to gather product information and price shop on the go. “We’re seeing an increase in price-comparison shopping and those apps are getting easier to use,” said Linda Barrabee, NPD’s research director for connected intelligence. Recent NPD data shows that three-quarters of consumers use the mobile web and shopping websites, while just over half (55 percent) use shopping apps like ShopSavvy and Amazon’s PriceCheck, which let them scan barcodes, take pictures, and say or type in product names to get information and find lower prices at local retailers or online.
It’s the in-store price shopping that retailers find most worrisome. InsightEpxress examined mobile shopping during the last three Christmas seasons and found that the number of smartphone owners who used their phones to search for a better price while in a store quadrupled between 2009 and 2011; 59 percent did so in 2011 compared with 40 percent in 2010 and 15 percent in 2009.
Looking specifically at showrooming, a recent ClickIQ survey found that 46 percent of online shoppers used smartphones and other means to research products while in a store, only to ultimately buy online. Likewise, Foresee surveys conducted between 2009 and 2011 found that the number of smartphone users accessing competitive websites while in a store jumped from 25 percent in 2009 to 43 percent in 2011. On the positive side, 65 percent of those shoppers reported accessing the website of the store they were shopping in, up from 52 percent in 2009.
Taking a broader view, the Pew Internet and American Life Project found that 25 percent of U.S. mobile phone users (46 percent of which own smartphones) used their phones over the 2011 holidays to look for a better deal while shopping in a store, while 38 percent called a friend for advice and 24 percent checked online product reviews. The trend is not all negative. The Pew survey further revealed that 35 percent of those shoppers ultimately bought from the store they were in compared with 19 percent who bought the product online and 8 percent who bought the item at another store.
Brick and Mortar Responds
Retailers are responding to “showrooming” in a variety of ways, ranging from matching online prices to stressing services you can’t get online to using social media to nurture and reward loyal customers.
“The impact on our business is exponential,” said Debbie Schaeffer, owner of Mrs. G TV & Appliance, which has been operating in Lawrenceville, N.J., for more than half a century. She estimates that online price-comparison shopping results in a loss in revenue of about 10 percent, but she is quick to point out that pricing is not the main problem. “We feel we can compete on price and more and more manufacturers are now policing MAP policies online,” she said. “The challenge is when consumers feel they don’t need to pay New Jersey sales tax. It puts us at a 7-percent disadvantage. It’s very unfair.”
Bjorn Dybdahl, president of Bjorn’s Audio and Video, San Antonio, agrees. “I can handle competition on the Internet if we’re all on the same footing,” he said. “I’m looking forward to getting a final resolution on the sales tax issue.”
The “Marketplace Fairness Act” introduced in Congress last fall aims to level the playing field by allowing states to collect sales tax on goods sold there regardless of where the online retailer is located; a dozen states require online retailers to collect sales tax and legislation is pending in 10 others. Many feel the federal bill has a good chance of passing but not until next year at the earliest. “No politician is going to campaign with that issue during an election year,” said Martin Hartunian, president of ABC Warehouse, the Michigan-based chain with 43 stores.
Faced with the double-whammy of having to compete with online dealers who don’t collect sales tax plus an onslaught of smartphone wielding customers bent on getting the best possible deal, brick-and-mortar retailers have no choice but to bring on their best game or lose sales.
“Showrooming is a legitimate problem when you have people like Amazon offering discounts to consumers who use its price-shopping app,” said Michael Perlman, president of BrandsMart USA, which operates 10 stores in Florida and Georgia. “If you have commission sales people, it’s a little bit less of an issue, especially if they’re on the ball, but it’s still a margin consideration.”
The top marketing executive at a large regional chain that sells electronics and appliances, who spoke off the record, said they are trying to embrace the connected customer.
“We encourage our sales associates, who are commission-based, to work side by side with customers and not hold back any pricing. Oftentimes we encourage customers to come over to computers in the store and say, ‘Hey, let’s go look at Sears.com or Amazon.com. We’re going to do as much as we possibly to match or beat this price; and you can take it today, you don’t have to wait for it to be shipped.’” Like Best Buy and Target, which have built a strong mobile web presence, the chain is also focused on improving its mobile site.
“The only way you can counter something like this is to do the best job you can in the presentation,” Dybdahl said. “Our salesmen have full control of the sale. If the customer still chooses to go in another direction, well, you’ve done the best you can.We’re competitively priced but, obviously, we’re not going to give stuff away either.”
Getting to know your customers and engaging them is an effective back-to-basics strategy for countering showrooming. “I want our salesman in customers’ homes,” Dybdahl said. “Floor traffic isn’t what it was four years ago. A lot of salespeople don’t like that but our future depends on being able to set ourselves apart from others in the business. That doesn’t mean we’re looking for a big custom install. It’s just knowing your stuff, handholding and being there to help.”
It’s also important to let customers know what your business stands for. “It’s a really matter of taking the time to get to know the customer and in getting the customer to know Mrs. G,” Schaeffer said. “It’s about getting the conversation going, finding out what they want and letting them know that, at the end of the day, we’re going to take care of you after the sale.”
Schaeffer is a big believer in using social media to promote and reinforce the store’s reputation and community ties.
“It’s great to put rebates on Facebook every once and a while, but the more I can get the message across about buying local and supporting our community, the better,” she said. “And as the local electronics/appliances authority, I try to pass along helpful information, like how to clean a grille. It’s not so much about the deal.”
Bjorn’s is a heavy user of Facebook, YouTube and Twitter and regularly taps into its homegrown list of 18,000 email addresses to stay in touch with customers and keep them abreast of the promotions and in-store events.
“We’re pushing pretty hard with Facebook now,” Dybdahl said, noting that they have 50,000 likers, up from 8,000 less than two years ago. Visitors are often invited to download an additional coupon or enter into a contest to win a shopping pass. The chain also uses Twitter for “deal of the day” type specials.
Apps can also be an effective tool for countering smartphone price shopping. NPD’s Barrabee noted that Best Buy, Target and other national retailers are using the popular Shopkick app to reward customers. “If you open the app and go into Best Buy, you get points for walking in.” Points or “kicks” can be redeemed for discounts on certain items or for rewards such as restaurant vouchers.
Best Buy and Target also have created their own shopping apps to help customers locate stores, find products in the store, get pricing and receive coupons via their smartphones. “They are increasingly thinking about how they can enhance the point-of-sale experience,” Barrabee said. “At the end of the day, retailers have to understand that shoppers are going to be armed with information. They need to figure out how they’re going to react to that.”
BrandsMart USA’s Perlman believes the big chains will continue moving toward more Internet-only and store-only items. “That’s how this is going to shake out,” he predicted. “And then companies like Amazon are going to have to figure out how to get people to see those Internet-only items.”