The Effects of Showrooming on Major Retailers

Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

"Showrooming"- it’s the new buzzword you can’t define, but chances are you have been guilty of it. Showrooming is when a consumer goes into a brick and mortar store to touch and handle a product, but returns home to buy it online. It is also defined as when consumers go into a brick and mortar store to look at a product, and then research the product on their smartphones, (particularly to compare prices), and then leave to purchase at home. In other words, it's when a customer treats a retail store as a showroom.

Stores such as Best Buy (NYSE: BBY), Target (NYSE: TGT), Wal-mart (NYSE: WMT), Sears, and other “big box” outlets are seeing “showrooming” in action, and are suffering the effects of it. Accenture’s holiday survey indicated that 53% of consumers would be interested in shopping online for Black Friday sales (instead of going into brick and mortar stores). The good news is that this is a reverse in the trend of the past three years when consumers were not as interested in Black Friday. The bad news is that shoppers want to stay home to do the shopping. And the worse news is that 56% plan to “showroom” their purchases. 27% of those shoppers are likely to purchase the product from their phone or tablet from right inside the store.

A survey by SOASTA showed 31% of shoppers will stay away from brick and mortar stores because other shoppers may be too aggressive. Of the 75% who shop online, 69% will use a home computer, 44% will use a tablet, and 34% will use a smartphone. And 73% of shoppers would like to see more mobile apps for online shopping.

This is good news for Amazon (NASDAQ: AMZN) and eBay, which dominate online sales and offer excellent mobile apps for purchases.

The big box stores and discount retailers are pushing back against showrooming--or at least, they want to be able to push back. They don’t want to be a showroom for a product that will just be purchased at Amazon or eBay later. Last January, Target went so far as to issue a statement to its vendors (note: not to consumers or its competition, but to vendors), “What we aren’t willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands.” The message to the vendors was clear: don’t expect to continue to work with us if you are going to offer your product online for cheaper.

But Target didn’t stop there. In October, the retailer announced it will price match the online prices of its major competitors (Wal-mart, Best Buy, Toys "R" Us, and others), during the holiday season (Nov. 1- Dec 16). Customers must bring in the ad or the competing website. (One must assume that means a consumer can price check on a mobile device from within the store and show the ad on the device.)

The beleaguered Best Buy has also announced it would price match against Amazon, and provide home delivery on items out of stock at stores.  The offer applies to electronics and appliances and will last from Nov. 7 through Dec. 27, but it will not be offered during Black Friday and Cyber Week. 

Wal-mart, which has always offered “ad matching,” but does not honor or match “internet pricing,” is upping the holiday ante with same-day delivery in select markets.

From a digital marketing point of view is there more that can be done to combat “showrooming” beyond internet price matching? One step would be to change the approach to point-of-sale purchasing. Where the term “point of sale” used to imply standing in line for a cash register transaction, technology has changed where the “point” for the sale can take place. Mobile payment systems, such as the ones now offered by Groupon (NASDAQ: GRPN), Square, and PayPal, could easily allow major retailers to conduct a transaction on the showroom floor. The benefit to the consumer is in the ease and instant convenience of the purchase, and not having to stand in a line. Mobile transactions can take place with an iPhone, iPod Touch, or an iPad.

Some retailers are already ahead of the game with this technology; however, they are not using it to their full advantage. Large retailers such as Lowe’s (which has issued iPhones to 42,000 employees), J.C. Penney, Costco, Sam’s Club, Apple, and others, are already providing tablets to their staff to allow them to research, check inventory, and conduct some transactions from the sales floor. Why not take that technology one step further and allow the full transaction to take place to completion?

Electronics and big box store hhgregg (NYSE: HGG) has accepted the reality of showrooming. “We definitely know it occurs,” said Jeff Pearson, senior vice president of marketing. “So we try to embrace it.” If a customer is seen checking out prices on a smart phone, an employee will encourage the person to use one of the store’s computer terminals where they can easily check out competitors’ prices. Hhgregg will then match the lowest price, he said.

The real question is why aren't more companies following suit?

One other obvious way to prevent showrooming would be to not only offer a price match guarantee, but to also offer a guaranteed same price in-store or online. Consumers are easily convinced to buy in-store when they know they are getting the best price, since they save on shipping and get instant gratification.

The real answer to brick and mortar sales may come in the form of Sam’s Club, Toys “R” Us, grocery stores, and compromise. Both Sam’s Club and Toys “R” Us (and presumably other major retailers), have a sales tool that could easily be tweaked to make consumers happier, while resolving the showrooming problem. Right now a Sam’s Club member can go online, place an order, and go the next day to pick it up. Grocery stores have allowed customers to place orders online for next day home delivery for years.

At Toys “R” Us, a customer can place an order online, and two hours later pick it up in-store. In the opinion of this writer, isn’t this the solution to showrooming? To allow a customer to place an order online and pick it up in-store (preferably same day)? And while the retailer has them in the store, upsell, add-on, and show the customer what a good sales person and marketing team can do!

Retailers must accept and embrace the realities of showrooming, and change their marketing and sales tactics as needed. The answer is not in combating it or providing temporary holiday sales measures. The real solutions will come in the form of adopting mobile point of sale methods, lowest price guarantees, and superior in-store customer service.

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ErinAnnie has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com, Best Buy, and hhgregg. Motley Fool newsletter services recommend Amazon.com, Best Buy, and hhgregg. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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