A recent study noted that, while shopping in a brick-and-mortar store, 67 percent of people check their smartphones to see if there’s a better price elsewhere, and the majority (62 percent) will leave a store and buy online for a lower price.
This behavior, also known as showrooming, is causing serious trouble for merchants.
Best Buy suffers a reputation as the showrooming poster child; observers have even dubbed it the “Amazon Showroom.” But they’re fighting back, and being one of the biggest electronics retailers has its advantages.
For one, they benefit from economies of scale. Higher profit margins mean they can afford to offer price matching, a strong deterrent to showrooming. Their deep pockets have also helped them negotiate partnerships with showrooming apps like Red Laser, and build fancy in-store boutiques showcasing Samsung and Apple products.
When smaller merchants try to fight showrooming, on the other hand, they often feel helpless. They can’t feasibly mount the same scale of attacks as Best Buy. However, technology can be their secret weapon, and with a little know-how and some help from big data, savvy merchants can turn e-commerce’s greatest asset against it.
Here’s what merchants need to know about showrooming, how to fight it and why technology —the original driver of showrooming—can also be the ultimate weapon against it.
Which Products are Vulnerable to Showrooming?
The first step to defeating showrooming is understanding what is vulnerable to it. Not all products are good candidates for showrooming. No one walks into a convenience store, spies a chocolate bar and runs home to buy it on Amazon. Candy is a classic impulse purchase, intentionally placed near the register to capitalize on people’s desire for instant gratification.
On the other hand, televisions are perfect for showrooming. They are big-ticket items with prices that vary wildly from store to store and season to season. For this type of purchase, it’s worth shopping around. TVs are also large and unwieldy, so most people won’t cart them home right away, even if they do buy in-store. Plus, TVs aren’t usually an impulse buy meant to satisfy a transient craving. Consumers generally don’t mind waiting for them because they probably planned to wait.
Gray Area Products
Of course, a lot of products fall between the Snickers bar and the 60-inch plasma, the most interesting of which are the products that consumers could choose to purchase either in-store or online. People may have good reasons to buy them in a store, but they have equally good reasons to buy them online. Understanding which products fit into this crucial gray area is the next step to defeating showrooming.
So what qualifies as a “gray area product”? Some examples include: sports gear, small electronics, outerwear, office supplies and sunglasses, among many others. They vary from merchant to merchant and will change over time.
And though common sense will help merchants determine which products belong in this category, observing customers in-store is an invaluable strategy. Find out which products they stop in front of with their smartphones. Take note of which ones they snap a photo of or scan the barcode for.
Taking this one step further, merchants can also look at historical purchase data to identify items that are purchased less frequently today than they were when smartphones were less prevalent. Merchants may also be able to survey customers or analyze existing industry research.
Once merchants identify their gray area products, the next step is convincing customers to buy these items in-store instead of online. Since data has shown that most people will make purchases online to save money, consider dropping or matching prices. Another option is to leverage customer loyalty programs, personalized service and other incentives. Merchants must deliver the kind of value that people simply can’t find online.
Technology vs. Showrooming: The Epic Battle
The best and most efficient way to deliver value in-store and stop showrooming in its tracks is to leverage technology.
One crucial tool to this end is location technology. Using GPS, NFC and other location-based technologies, merchants can push relevant offers out to customers when they are near a store, encouraging them to come in and buy whatever they are looking for, rather than purchasing it online. All the better if location data can be combined with search data to find potential customers who are not only nearby but also in active consumption mode.
Shopkick, a popular geo-location app, focuses on rewarding users with virtual currency (“kicks”) just for checking in at selected retailers. The kicks can then be redeemed for rewards, like gift cards. Foursquare also allows retailers to offer discounts and deals to shoppers in exchange for visiting their brick-and-mortar locations.
Another key technology in the fight against showrooming is mobile payment technology. This can take the form of mobile wallets, e-commerce apps and more. All of these have the potential to greatly reduce the friction of buying an item in the real world by making it a one-click process or by combining payment with coupons, rewards and loyalty programs that incentivize people to buy items in a brick-and-mortar location rather than online. LevelUp is one such app. Using it, merchants can offer users rewards, like $5 off a meal, for paying with their phones in-store.
Finally, technology can be leveraged to harvest big data in the fight against showrooming. The more a merchant understands about customers and purchasing behavior, the better equipped he will be to turn the showrooming tide in his favor. Of course, leveraging big data will require merchants to invest in sophisticated (though not necessarily expensive) software that harvests consumer data and parses it in ways that are insightful and actionable.
Putting it All Together
Showrooming isn’t inevitable. If merchants understand how it works and why it happens, they can actually use the consumer behaviors that drive showrooming (including mobile technology adoption) in their favor. Technology is, perhaps somewhat counterintuitively, the best weapon that merchants have in the battle against showrooming. By collecting and analyzing data on their customers, merchants can convince them that they’re better off buying in-store. Give customers exactly what they’re looking for right when they want it, and you’ll be able to stop showrooming in its tracks.