How Showrooming Will Impact Your Retail Business
The growing trend of showrooming among consumers is a nasty phenomenon. Here are some examples as well as steps retailers can take to combat this trend:
* I go to a tradeshow and meet with a vendor. He starts with his pitch that we'll see a good return on investment by using his product. My client takes out his phone and, using the RedLaser app, gets all the lowest retail prices for the product on the table before us. The product retails for $49 but is available online for $34; we buy the product for $28 so our margin is $6. The discussion turns to whether $6 is enough and we decide right there that we won't be carrying that product. The point is that retail prices are now immediately visible to anyone who can scan a product's UPC with a mobile phone. That's the basics of showrooming — go to a retail store to touch and feel the product, then scan for lowest price right there in-store.
* I went to a Barnes & Noble store last week to look for a hardback book. I had the option to buy the book at retail for $38 (full retail price) or have Barnes & Noble order it for me on its site for $18 plus $3 shipping and get it in two days or three days. Showrooming cannibalizes the brick-and-mortar channel by teaching consumers to always check a brand's website price first.
* It appears Amazon.com has an algorithm where if it stocks a product, it will always have the lowest price for that product. So if an affiliate site lowers the price ona product, Amazon beats that price within an hour no matter how low the price is. Amazon is demonstrating to consumers that it always has the lowest price. Affiliates are being forced to offer coupons and promotions to get their prices below Amazon's, but that's not widely known by shoppers. The basic message is that Amazon has the best price. This is a tremendous advantage in the category-killer war in categories like books, electronics and high-ticket items with UPC codes.
* Last holiday season Amazon actually gave extra discounts to consumers who went into retail stores and did price-comparison shopping. If you "showroomed" a product, you got a discount coupon. Amazon received a lot of criticism around its Price Check app, proving that even bad publicity is a good thing because it made clear to lots of consumers that Amazon will always have the lowest price. Expect more of the same this holiday season.
* The USPS is offering a holiday promotion — 2 percent off your postage bill, which isn't chump change for a catalog ratailer (it can add 1 percent or more to your bottom line) — if you put mobile-optimized promotional offers, coupons and catalogs into customers and prospects’ hands. Rather than helping catalogers, this promotion is training consumers to always shop on the web for price.
* How quickly are consumers learning about showrooming? Most shoppers now know that they can use their mobile phone to instantly comparison shop while in-store. With the percentage of consumers owning a smartphone continuing to rise, coupled with the high percentage of those consumers who have downloaded a comparison shopping app like RedLaser, showrooming has become a huge retail trend.
* Watch this holiday season as negative press about showrooming serves to train American consumers that they should always shop for best price online for any product with a UPC code.
* How will manufacturers react to Amazon's predatory pricing? Some manufacturers have pulled their product lines from the retailer's site. How will Amazon affiliates react? Some big-name retailers are ending their affiliate relationship with Amazon because they find they lose more than they gain from the relationship. Will pushback from manufacturers and retailers slow the trend of consumers shopping for the best price via their smartphones? Only time will tell, but in the short term this holiday season expect that showrooming will have a negative effect on cross-channel retailers’ bottom lines.