Showrooming: Big Deal or No Big Deal?

Discussion
Oct 05, 2012

Based on much of the press coverage that showrooming has received, you might consider it just about the biggest competitive issue facing brick and mortar retailers today. You wouldn’t be right. As a new pricing transparency study by RetailWire discovered, the negative effects of showrooming are largely restricted to a small number of retail channels (see yesterday’s discussion on Best Buy) and to the paranoid imagination of others who see overwhelming competitive threats around every corner.

In a RetailWire webinar last week, Dick Seesel, principal, Retailing In Focus and a former executive at Kohl’s, said showrooming was more of potential problem for most retailers than something they are having to deal with now.

"I think it’s really at the start of a potentially mushrooming growth curve," Mr. Seesel said, "and when you think about other smartphone trends — everything from mobile e-commerce to review sites to e-couponing to GPS-based marketing — we’ve seen all of these things escalate so rapidly it really pays for retailers to get in front of them as quickly as possible with a strategy instead of being reactive to them."

Wes Woolbright, national pricing director, Safeway, told attendees of the webinar that showrooming was not a significant issue in the grocery channel as many factors, in addition to price, currently go into consumers’ purchasing decisions.

"A dynamic that plays into both the mobile and online space is trust. A brick and mortar environment presents a greater opportunity to get some certainty about the purchase that’s being made," Mr. Woolbright said. "Another dynamic is the ‘element of now.’ If I’m in a store I can pick up the item immediately and get instant gratification."

Retailers who participated in the study, underwritten by IBM, listed price sensitivity on the part of consumers (29 percent) as the pricing practice issue having the greatest effect on their businesses. Intensified discounting/promotional activity (22 percent), pricing transparency/showrooming (22 percent), competitive pressure from online discounters (18 percent) and frequency of price changes (nine percent) followed.

What do you think are the most important pricing related issues facing retailers today? What can retailers do to gain some semblance of control in an environment that is becoming increasingly transparent?

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15 Comments on "Showrooming: Big Deal or No Big Deal?"


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Ryan Mathews
Guest
9 years 7 months ago

All retail is not created equal. I doubt anyone in America “showrooms” a can of pork and beans, but lots of them showroom mega-size flat screen televisions.

I also think the entire “showrooming” concept shows that its exponents and critics alike miss the critical point — CONSUMERS NO LONGER THINK IN TERMS OF CHANNELS OR PLATFORMS. THEY JUST SOURCE AND BUY STUFF IN THE MOST CONVENIENT MANNER POSSIBLE.

So, all you channelistas and media mavens need to get over this issue.

Sorry … I feel better. Thanks.

Dick Seesel is directionally right here. Things are changing and we are on the Titanic trying to judge the size of the impact of the change by staring at the ice cubes in our drinks.

One last time (I hope) — It isn’t showrooming or mobile commerce or software assisted buying or anything else; it’s life in the brave new digital world.

Welcome to the party. You’re early, but a few other guests are already here.

Max Goldberg
Guest
9 years 7 months ago

Even as the economy improves, consumers remain concerned about price. The Great Recession has taught them to look for the lowest price. This desire for the lowest price can be offset by great customer service, immediate access to a purchase or another real or perceived value.

Retailers can gain control by bringing their brand’s values to the fore. Not every retailer can or needs to compete on price. Value bundling, exclusive products and customer service all allow a retailer to compete and not simply rush towards the lowest price. Remember the core story of your brand, and live it.

Fabien Tiburce
Guest
Fabien Tiburce
9 years 7 months ago

Many customers are not in fact obsessed with finding the lowest possible price and will happily pay a little more for convenience and service. After all, you can’t praise Apple on the one hand and then claim that price sensitivity is all that matters on the other. Customers want value and value takes many forms. Yes retailers would be wise do sell products/SKUs “not available elsewhere” but the in-store environment is still a better shopping environment for *most* products and *most* customers (and not just certain demographics and age groups). Spend more time telling your story in-store, less time fighting the small percentage of customers who will inevitably shop the absolute lowest price. Competing on price alone is a race to the bottom.

Dick Seesel
Guest
9 years 7 months ago

Just to weigh in with another point I made on last week’s webinar: all of the issues we’re talking about are part of a larger movement toward “consumer empowerment.” Ryan is correct that there are bigger issues at play here vs. one technological change or another.

And remember: “Just because you’re paranoid doesn’t mean they’re not out to get you!”

Kai Clarke
Guest
9 years 7 months ago

Retailers need to take a full-price competitive, and price matching position on all of their products. This will minimize the impact of price, and increase the roles which customer service, immediate availability, and the personal purchasing experience play in the consumer’s purchasing decision.

Camille P. Schuster, Ph.D.
Guest
9 years 7 months ago

Showrooming exists and is here to stay. Retailers shop for a good price when they purchase products. Consumers are now doing the same thing. Consumers will pay the price that provides the best value. If you do not provide the value consumers want, you lose the sale. That is our competitive world.

Ed Dunn
Guest
9 years 7 months ago

Retailers will have to learn what products they carry are subject to showrooming. For example, maybe no one will showroom disposable razor blades at Target, but they will more likely to showroom digital cameras and toys.

I have over the past 10 years gone into office supply stores and home entertainment stores and played with items in-store, just to order from Amazon.com later that day.

Anne Howe
Guest
9 years 7 months ago

I agree the only way to look at this is through the eyes of the shopper. Shoppers just want what they want, when they want, and how they want. And they have the ubiquitous tool to get it — what I call the path to purchase in their pocket. Make no mistake, they will use it more and more if it simplifies decisions and enhances life as they see it at any given moment. Instant gratification may win over click to buy, but what shoppers craved and now love is the visibility that gives them control at the center of their own unique universe. That, indeed, is the real world we live in.

As a colleague of mine says: “Buckle Up.”

Mark Price
Guest
Mark Price
9 years 7 months ago

I think your second question highlights the issue — it is not the increased promotional activity, price sensitivity, or showrooming — it is actually a combination of the three. Transparency reduces the barriers to switching, making it clear when a retailer has put in place pricing that is out of line with the market, as well as when a retailer lacks coupons and purchase incentives.

Really, the big issue for retailing is customer experience, and tailoring that experience to the needs of different customer segments. Some segments want to get “in and out” as fast as they can; other segments want service and support by experts; while some segments want to make sure that they are not losing money in the transaction. Net of all, customer experience is, and frankly has always been, the greatest driver of retention, which leads to higher margins and more efficient marketing spending.

Focus on customer behavior to drive pricing strategies, not the other way around, to differentiate your retail business, and reap the rewards.

Ralph Jacobson
Guest
9 years 7 months ago

In addition to what’s in this great report πŸ˜‰ , I would also say that one of the best strategies is to take the shoppers’ attention OFF of “price” in the first place. If quality, selection and most importantly, services are perceived by the shopper, pricing will be looked more as to simply confirm the value, rather than to be the main driver of the purchase decision.

Mark Burr
Guest
9 years 7 months ago

Consumers are and have always been concerned about price. It is what drives the retail world. More, cheaper, faster. It is the entire story of Walmart.

When price is the lowest common denominator, it will be the lowest common denominator. Then, there is Apple. Then there is…you fill in the blank.

So few retailers go beyond the lowest common denominator as their key factor in the value equation that all too often it is the most common factor. It doesn’t have to be.

Did I mention that it doesn’t have to be?

Adrian Weidmann
Guest
9 years 7 months ago

Ryan is spot on here. This is not about dissection of any one particular challenge. It is all about the reality of the digitally empowered shopper. From their (all of our!) point of view, there are no channels — PERIOD! There is just the digital world where we can all leverage all means to explore, discover, and be surprised and delighted by the process and experience. I just ‘found’ and purchased a keyboard cover for $3 (including shipping) while ‘surfing the net’ while on a business trip to Chicago and was delivered to my home in Minneapolis via China post. It was a fun shopping experience.

The digital world has truly made the world flat. It has also made the channels just components in an omni-channel (360 degree) experience.

Tom Redd
Guest
9 years 7 months ago

It’s Friday, so I will be simple and direct on pricing. Three important pricing areas or elements:

1) How to redefine the pricing lifecycle? With so much promo activity going on, what is a “regular price” anymore? Customers have many more promos and loyalty programs to apply when it comes to pricing, making it more complex. Think of that as pricing is addressed.
2) Positioning private labels — how to use price to generate value for private label items and generate higher margins here? Use PL to map out the pricing strategy.
3) Stronger Price Management: Price management is more important than ever. A retailer must keep size parity and brand parity and flavor groups aligned so that it makes sense to a consumer when she’s standing at the shelf. Make it easy for the consumer to take the item and put it in the basket…balance the elements of her/his decision.

OK, back to being Friday.

David Slavick
Guest
David Slavick
9 years 7 months ago

This is much ado about nothing. Seriously, are retailers staying up at night worrying about lost sales due to price comparisons through digital means? Hardlines with high price points are likely the biggest area of price comparison and for those in that space they should invest in technology, comparison tools, associate coaching and call center training to save the sale. As shared here, no one is going to price shop or “showroom” the price of bananas. If they do, they’ve got a lot of time on their hands.

Christopher Krywulak
Guest
Christopher Krywulak
9 years 7 months ago

I would agree with Max Goldberg on this one: Not every retailer needs to compete on price. The showrooming threat is exaggerated by the assumption the shopper, upon discovering a lower price online, is going to walk out of the store immediately and refrain from purchasing that product in that store. The fact is, most people won’t do that. If the in-store experience a good one (informative, efficient and easy) with quality customer service, many shoppers are content with spending a little more to make the purchase on the spot and walking out with the desired product.

There’s no avoiding price comparisons via smartphone. The trick is to offer an in-store shopping experience so good that it converts as many walk-in customers as possible, including those who came in to showroom.

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