Showrooming? Show Me the Money

“Show me the money!” A phrase so powerful it has won Oscars. Now there is a new term out there that is just as powerful but much, much dirtier—Showrooming. The term is used to describe how consumers are more and more using traditional brick-and-mortar locations as a showroom to view/demo a product, compare prices on their smartphone, and leave to make the purchase online.

This concept is getting lots of press lately. Usually it is linked to articles about Best Buy and why the retailer will eventually go out of business. I firmly believe that “showrooming,” if leveraged correctly, can actually help brick and mortar locations. Every person that walks into a location represents a potential sale. Regardless if that consumer is more inclined to buy online or not.

Let’s say Joe Shopper goes into his local electronics store to see a TV that he has recently looked at on Amazon for $1000. If Joe walks into his local electronics store, and that same TV is $975, why wouldn’t Joe buy it right then and there vs. paying a higher price from Amazon? There really isn’t a compelling reason.

Okay, let’s reverse the story: Joe sees a TV on Amazon for $975 and his local retailer has it for $1000. Does Joe automatically purchase from Amazon? The answer is not so simple. There are many reasons why Joe might choose to spend the extra $25. Maybe he likes the salesperson, needs the TV today, wants the loyalty points, wants the option for local service/support, or maybe he’s the rare consumer who wants to help the local economy. The point is there are many reasons to make an in-store purchase.

So why doesn’t this happen more often? It’s often because Amazon is priced much lower than brick and mortar retailers. Their business model allows for better margins at lower prices. Traditional retailers maintain margin integrity then price match on a case by case basis. The retailer’s reasoning is it’s much better to price match discount a few sales then on all sales. There’s no faulting this logic; or is there?

There is now. The pool of consumers purchasing products in-store has dropped dramatically. An even smaller number of consumers visiting brick and mortar stores will buy at full price. The reason for this is virtually ubiquitous access to pricing, price matching and price alert applications, which has shifted negotiation power to the consumer. Consequently, retailers MUST find a new approach.

First things first, they must embrace the concept of “showrooming.” This means salespeople and managers must engage with these potential customers. They need to find out the “right” price for each particular customer. If retailers have the right tools, to leverage this “right” price information, they can make more appropriate discounting decisions to drive more sales of specific items to specific customers at specific times in the future. If the the retailer can do this while maintaining service with a smile then they will win that customer for life.

If the retailer does not have this capability, two things need to happen:

1. The retailer must find a way to re-engage with the customer. That means taking personal service to a higher level than most retailers have been offering (read: they must be more like Nordstrom). Stores have an edge with customers over online retailers; they can build a personal connection. No piece of real estate in the entire retail industry is more important than the three feet between the employee and the customer. Companies that understand this power, and can harness it effectively, can be successful in this age of “Showrooming”.
2. The retailer must innovate or tap into innovative companies that are disrupting current models. Companies like ExactTarget, ShopKick, and yes, Lemur IMS are great examples. But merely bringing these companies into their customer service portfolio is not enough. Retailers need to insure that the value propositions speak to the majority of their customers, both internal and external. As a rule, consumers are an impatient bunch. If they don’t see the value, they move on very quickly. Store employees can be just as impatient when it comes to embracing change.

Throughout my time in retail I saw multiple customer initiatives fail because there was no buy-in at the store level. Retailers as well as their innovative partners must take the time to ensure new platforms are implemented correctly and used effectively. What is good for the goose (customer) is not always good for the gander (employees). The good news is that retailers are starting to engage companies like Lemur IMS, among others, to help them leverage showrooming to their advantage and deliver a better customer experience.

Retail is a giant animal. Much like an elephant, it takes a while to get moving, but once it’s running, the rumblings can be felt far and wide. It is time for retailers to go beyond engaging innovative companies and “Show Them the Money!!!”