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:
- 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.
- 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.
- 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:
- 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.
- 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.
- 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.
- 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).
- 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.
- 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