“Browse here; buy from our competitor!”: New Developments in the Fight against Showrooming
For the past year, the Retail Law Advisor has been following developments in “showrooming,” a term used to describe how consumers browse traditional brick-and-mortar stores to evaluate a product before purchasing through an online vendor. Showrooming has become an increasing focus of the retail industry. However, there is intense debate over how and to what extent showrooming affects the business of the showroomed stores. As the concern grows, traditional retailers are responding in a range of ways to combat the practice, the most successful of which seems to be creating unique, streamlined in-store shopping experiences.
Several recent polls confirm that showrooming is becoming a serious problem for traditional retailers, with about 40% of consumers surveyed responding that they engage in showrooming. These consumers are most likely to visit Best Buy, Wal-Mart, and Target to examine products before purchasing online through Amazon, although smaller retailers both traditional and online are also part of the phenomenon. In response to showrooming, major retailers have initiated permanent price-matching polices, hoping to keep sales away from Amazon and each other. However, because customers must track down staff to verify the price and face other potential hassles such as a particular size or color of product being out of stock, price-matching is only a partial solution at best. Competing on price alone is also a losing game because brick-and-mortar stores have higher overhead costs for retail space and sales representatives.
Further, under current law, online retailers still enjoy favorable tax treatment because they are only required to collect taxes from customers in states where the retailer has a physical presence, although this may change. In May 2013 the Senate passed S.743, which is the newest version of the proposed Marketplace Fairness Act. The House has now referred this bill to the House Committee on the Judiciary to determine its constitutionality. If enacted as legislation, the bill would require remote sellers with revenues of $1 million or more to collect taxes for every state where they have customers.
Aggressive price competition also drives retailers to lose control of their own pricing scheme, sometimes to the point of suffering losses. For example, Best Buy lost $65,000 on the day of a Wal-mart Facebook promotion because it matched Wal-mart’s advertised $127 iPhone price, even though Wal-Mart allegedly had a limited number of phones and was out of stock in many locations.
Some traditional retailers have also experimented with charging a browsing fee that is refunded upon purchase. Vera Wang initiated a $482 fitting fee in its Shanghai bridal boutique but scrapped it when consumers responded with outrage; an Australian food store charges $5 for browsing; and a few shoe stores are known to have a $20 trying fee. These methods remain wildly unpopular with consumers, however, and drive away potential business.
Instead of competing purely on price or using hardball tactics such as changing product codes (to make price comparison difficult) and implementing browsing fees, traditional retailers should play to their relative strengths. Brick-and-mortar stores have the ability to offer unique in-store experiences, engage directly on a personal level, and establish relationships with consumers. Large chain retailers are already picking up on this concept. Sears is rolling out smaller, upscale appliance stores this fall, paying attention to details such as quality finishes, lighting and presentation. Coupled with price-matching and a staff trained to take a more educational, consultative approach to sales, Sears aims to turn showrooming on its heels. Likewise, Best Buy’s new partnership with Microsoft to offer stores-within-stores for Windows products, with trained professionals on hand to demonstrate new products and field questions, is a step in a similar direction. (The Microsoft partnership is an expansion of Best Buy’s current stores-within-stores relationships with Apple, Samsung, and Magnolia.)
Other retailers are incorporating technology into their sales process and partnering with the brands they carry. The dealer network Specialty Electronics Worldwide is giving its sales staff tablets to pull specs, show videos, compare prices and close deals onsite. Canadian retail sporting goods giant Sport Chek has also created a Retail Lab flagship filled with digital signage and interactive digital shoe walls with product features, live Twitter feeds, and interesting facts about athletes’ achievements while wearing any particular shoe model. It is also partnering with brands such as Nike, Oakley, and Reebok to let consumers customize their own products.
For smaller boutiques, outstanding personal service still wins the business. A cyclist who wanders into a cycling shop describes the buying experience of having a bike customized and the employees watching him ride up and down the street, even offering to ride with him to test it out: "By the time you've been there for an hour, their enthusiasm is so overwhelming that you really don't want to go elsewhere."
These types of solutions are consistent with a Gallop study suggesting that showrooming itself is not the concern, but rather that retailers are failing to engage their consumers and create a compelling and differentiated brand promise. It is only in this case, when consumers do not have an emotional connection to a particular retailer, that they shop primarily based on price, where online retailers have an advantage.
The future of retail is changing dramatically: consumers are showrooming; online merchants are also “webrooming,” or setting up physical store locations; and many retailers are moving beyond a distinct online versus traditional storefront perspective. Increasingly, retailers are adapting aspects from both sides of the increasingly blurred line between online and in-store environments to create a seamless shopping experience. In this context, perhaps the best advantage that a brick-and-mortar store can have is a talented and engaged sales staff to make the shopping experience efficient, personalized, and fun.