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What's Showrooming? (And Six Ways You Can Combat It)

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More and more shoppers, armed with smart phones, are going to brick-and-mortar outlets to examine and evaluate merchandise—and then buying the product they want online, often while they're still in the store, to get a better deal.

The practice is known as "showrooming," an apt term because it effectively transforms mall outlets and big box stores into showrooms for their online competitors.

Brick-and-mortar retailers of every size and in every category are asking themselves how to avoid becoming victims of this trend, but the unfortunate truth is that in today's retail environment some degree of showrooming is inevitable. Nonetheless, the situation isn't as grim as it sounds.

Various strategies can significantly mitigate the effects of showrooming, and loyalty programs are at the top of the list—that is, if those loyalty programs are designed with showrooming in mind and are backed by technology that's up to the task.

For loyalty programs to have the desired effect, retailers who decide to deploy them must face three facts in designing an antishowrooming strategy:

  1. Their prices have to be in the same ballpark as those of their online competitors. Exactly what that means for retailers will vary from category to category. A large percentage of customers is willing to pay a little more for the benefits of shopping in a store—the ability to touch and feel the product, the instant gratification of immediately owning it, the personal service—but there are limits, and retailers have to be realistic in their pricing.
  2. Customers make every purchasing decision independently. Retailers can't expect them to take long-term loyalty rewards into account as part of the buying decision unless those customers are explicitly prompted to do so.
  3. Buying decisions often take place in a matter of seconds, which means that any antishowrooming strategy that retailers may adopt needs to be executed in near real time to have any effect.

Tactics That Work

With these three facts of modern retail life as background, here are six tactics that are worth exploring when showrooming is a problem:

  1. Closing the price gap. When customers in a loyalty program receive discounts, the distance between the in-store price and the competitor's online price diminishes. Based on facts two and three (see above), retailers must find a way to communicate the "effective price" (the current price minus the points-based discount) quickly and clearly: for example, "With your Valued Customer discount, the effective price of this item is $123.50!" Customers can't be expected to do the math themselves.
  2. Bonus points. When showrooming is a problem with specific items, retailers can offer increased discounts or points on those items to further mitigate the price difference.
  3. Free accessories. Retailers can offer free items that complement the purchase, such as a set of barbeque implements or an apron to go along with an outdoor grill. Often, such items have a perceived value that's significantly higher than their actual dollar value. Another option is to offer a free or extended warranty.
  4. Bounceback offers. If a customer's behavior indicates the potential for a lost sale, retailers can transmit a bounceback offer, either with a discount or some other incentive. To be effective, however, the bounceback needs to happen in near real time and it must relate very specifically to the customer's interests (not just microwave ovens, in general, but a counter-top microwave oven).
  5. Unique offerings. Larger chains may have enough clout with suppliers to obtain unique products or models within a product line that have features available only when purchased in the store.
  6. Pushed coupons. With today's technology, retailers can offer instant discounts and special cross-sell or up-sell opportunities; they can even reward customers simply for entering the store. The value of so-called push technology is that it gives customers a reason to download and use a brand-specific app and, more important, a reason to make an in-store purchase.

The Importance of the App

Obviously, for any of these strategies to work during the 5- or 10-second window available to change a customer's mind, that customer must have downloaded and launched an app.

Retailers often underestimate the time, energy, and creativity required to create an app that customers will actually use. Remember that an effective app needs to compete with everything else that is available online for customers who are researching a purchase. The app must provide the following:

  • Product information
  • Customer reviews
  • Loyalty-specific information, such as points earned and tier status
  • Special offers

Beyond those criteria, the app must be also able to use the unique information that the retailer has about the customer, such as purchase history. Finally, chains must promote their app through techniques like in-store signage, email marketing, and associate training.

More Work for More In-Store Sales

Even with the best tactics, brick-and-mortal retailers can't expect to totally eliminate showrooming. But the situation isn't hopeless. With a little more work, stores that provide a great in-store experience and make use of the tactics outlined in this article will continue to prosper.

(Image courtesy of Bigstock: Modern woman shopping)


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Michael Stevens is an experienced technology writer for TIBCO Loyalty Lab and a novelist. He is a phi beta kappa graduate of the University of California at Berkeley.

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Comments

  • by Rishi Fri Sep 7, 2012 via web

    I agree with Point 1. It is definitely important to close the price gap. Most electronics retailers offer a price match, while more competitive ones offer a "10% price beat" strategy. The strategy you put in place will depend on one competitive advantage -- shipping:

    1) Size of your product: The bigger the product, the more likely the consumer is likely to buy from you since larger products have higher shipping costs. Make sure your sales staff mentions how expensive it can be to ship large products online, especially if your customers bring up the competitors.
    2) Shipping policy: Most online stores don't reimburse return shipping charges if the item is damaged or needs to be returned. Use this to your advantage and make sure it is mentioned by your sales staff.

    For more retail cheat sheets including "How to Prepare for the Rise in Mobile Shoppers", check out or tips and tricks at http://mdv.to/NmISj3

  • by Matt Haskell Fri Sep 7, 2012 via web

    Great article, Michael. I share many of your opinions on this matter. I think showrooming is as much of an opportunity for retailers as it is a bane. When Facebook rolled out "Timeline," many businesses were up in arms because their landing and capture pages became obsolete. What it did, however, was caused social media marketers to try harder to make engaging content that was shareable and "likeable" to bump up their results in the search algoritms.

    I also wrote a blog on showrooming (http://bit.ly/KAT6XL) a few months ago that explains some opportunities that retailers can use to convert in-store shoppers and keep them away from Amazon for every purchase! Technology is an amazing thing, both for customers to have more control and for retailers to make the brick-and-mortar shopping experience more engaging!

  • by Bob Brothers Fri Sep 7, 2012 via web

    Vampire Marketing - Protect Yourself
    ‘Vampire’ marketers are sucking the life out of more and more traditional businesses. Here are some things your brick-and-mortar business can do to keep from becoming just another showroom for aggressive on-line marketers.
    http://market-intel.com/blog/?p=561

  • by Rahul Jagannathan Sat Sep 8, 2012 via web

    I disagree with some of Michael's solutions to combat Showrooming.
    Closing the price gap: Try as you might, but a brick-and-mortar retailer can NEVER match the price of an online player. The cost savings are massive for the online player. He doesn't have to run a shop. He has to just maintain warehouses in places that have cheap rentals. The aggregation achieved by a single online player like Amazon is so massive that the company has tremendous amount of bargaining power with the suppliers, which cannot be managed by brick-and-mortar players again.
    Bonus points, unique accessories, coupons, bounceback offers: All these are financial incentives in some form. Financial bonds are the EASIEST to break. All these things can be offered in a much better fashion by an online player. These are not going to affect customer loyalty positively for a brick-and-mortar player.
    Unique offerings: Again, the aggregation of online players is much more significant when compared to brick-and-mortar formats. This puts them in a position to strike better deals with suppliers and deliver better 'unique' offerings. Moreover, with the kind of CRM systems in place, online players have access to a wealth of data about their customers which helps them position these unique offerings better.
    What can help brick-and-mortar companies differentiate is, as pointed out rightly, a great in-store experience that helps them build a social bond with the customer. You need to create a bond that makes the customer want to come back - this is what Starbucks has done. The customer must develop an association with the store and its personnel and not just the product. Therein lies the real challenge for mortar stores. If they run on franchise models, it becomes difficult to build that kind of relationship. What a company like Amazon can CLEARLY replace is Wal-Mart's price, but not Nordstrom's experience.

  • by Cathy Reynolds Sat Sep 8, 2012 via mobile

    I agree with Rahul, the last comment said it perfectly!
    Inhouse experience is key and keeping the selling staff well informed with product knowledge to stop the customer from having to go online to do their own research on that product is just part of our due dilligence.
    I personally have exclusive product instore that cannot be shopped elsewhere. Its a big job on my part but well worth the efforts when customers buy.

  • by Tobias Schremmer Sun Sep 9, 2012 via web

    Good stuff.

    In addition to the last point about having a compelling app, much of the spending in mobile retail presence is (rightly) on having a super-strong mobile version of your own site. Expecting a significant # of shoppers, even ones who are enrolled in loyalty programs, to go through the app download process and then use the thing is not very realistic. I'd like to see any kind of research/data on % of retail apps that have moved the sales needle... no doubt a few have done it well. But many are still underwhelming shoppers with a site that is not optimized for mobile.

  • by timo platt Sun Sep 9, 2012 via mobile

    Retailers can effectively combat showrooming by engaging each shopper, learning what they want to buy, and earn their trust with product expertise and sales support, and them guide them through the purchase decision and close the sale: http://bit.ly/KDVEN4

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