leadership

Stop customers treating your business as a showroom

Kath Walters /

feature-scan-200Showrooming – the consumer practice of checking out a product in one store and buying it elsewhere at a better price – has always been a challenge in retail. But with the advent of smartphones and the expansion of online retailers such as Amazon.com, showrooming has gone from being a headache for bricks and mortar retailers to a full-blown migraine.

Mobile phones allow consumers to “make a purchase anywhere – and that takes out the middle step of going home and ordering online,” says Wharton marketing professor David Bell. “As technology facilitates it, [showrooming] will only become more prevalent.”

The latest salvo in the battle: Walmart stores’ recent decision to stop selling Amazon’s Kindle e-readers and tablets, a step fellow big-box retailer Target also took earlier this year. The chains’ decisions to exile the Kindle come as Amazon continues to promote a mobile app that allows consumers to scan barcodes in physical stores and find the (usually cheaper) Amazon price for that item immediately.

“The issue used to be, ‘Can I get you to come to my store instead of a competing store?'” notes Ron Adner, professor of strategy and entrepreneurship at Dartmouth College’s Tuck School of Business. “Now you are bringing the other store in with you. And that raises the level of competition.”

In fact, the pressure created by showrooming is evident in a number of moves that bricks and mortar retailers have made recently. In January, Target sent a letter to vendors asking for their help in combating the problem, suggesting that they create exclusive products for the Minnesota-based retail chain or find ways to match the low prices offered by online retailers. And Best Buy has replaced the standard barcodes on some products with different, chain-specific barcodes that make it impossible for consumers to scan those codes and find a quick online price comparison.

Certainly, smartphones are rewriting the retail rulebook. According to market research and data analytics firm InsightExpress, 59% of smartphone owners used the device to find a better price while shopping in a physical store in 2011, up from 40% in 2010. And a survey from digital marketing research firm comScore shows that nearly six out of 10 shoppers who went into a store but bought later online had actually intended to make the purchase in the physical location, indicating that retailers could be doing more in their physical stores to keep those customers.

The category most likely to be purchased via a showrooming process was consumer electronics, followed by apparel clothing and accessories, comScore reported.

Continued next page.

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