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Showrooming Remains a Problem (or Does It?)

June 13, 2013


“Physical retail stores have long been considered both places to research and to purchase products,” write McKinsey & Company analysts Francesco Banfi, Paul-Louis Caylar, Ewan Duncan and Ken Kajii. [“E-journey: Digital marketing and the ‘path to purchase’,” McKinsey & Company Telecom, Media, and High Tech Extranet, 16 January 2013] But with retail stores finding it hard to compete with online prices, today’s stores continue to wrestle with a practice known as “showrooming.” Showrooming involves consumers using a brick-and-mortar store to physically check out items but then purchasing those items online. How prevalent (and worrisome) this practice is remains the subject of debate. The editorial staff at Consumer Goods Technology writes, “Brick and mortar retailers are painfully aware of the impact of showrooming — the act of consumers using their mobile phones in-store to compare prices with competing retailers — on their bottom line.” The staff reports that just before last year’s holiday season, Edgell Knowledge Network (EKN), in partnership with eBay Local, conducted a survey of retailers. One of the survey’s findings was that “80 percent of retailers expect[ed] to be impacted by showrooming; they expect[ed] the average loss of sales to be 5 percent — a significant number, given the low margins in many retail segments.” [“80% of Retailers to be Affected by Showrooming,” 20 November 2012]


Gaurav Pant, research director at EKN, told the editorial staff, “Showrooming is a phenomenon that’s here to stay. One in four shoppers used their mobile phones to compare prices while in the store during the 2011 holiday season, and those numbers will only grow.” Henry Helgeson, CEO and co-founder of Merchant Warehouse, agrees with Pant that showrooming is here to stay, but claims the percentage of shoppers that check prices using their mobile devices is much higher than Pan reports. He writes, “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.” [“The Best Weapon That Merchants Have To Combat ‘Showrooming’,” Business Insider, 28 April 2013] It turns out that the 62 percent of shoppers who leave a store to buy elsewhere for a lower price do have turning point for making that decision. Chuck Martin reports that a nationwide study, conducted by Anderson Robbins Research for Linkable Networks, concluded, “The majority (62%) of shoppers would leave a store and buy online for a price up to 20 percent below the one in the store. For a discount of 5% and 10%, a store would lose almost a quarter (23%) of its price-checking shoppers and for a discount of 15% and 20%, another 39%.” [“Showrooming & the 20% Mobile Deal Factor,” MobileShopTalk, 5 April 2013] The study concluded that only 13 percent of hardcore shoppers would leave a store regardless of how small the savings found elsewhere.


In other words, brick-and-mortar stores have some wiggle room to negotiate with consumers who comparison shop using their mobile phones. Working with customers to get them the best in-store deal may have benefits beyond the initial sale. The McKinsey analysts note that stores play a significant role in retaining customers. They write:

“In today’s digital era, the role of stores has evolved significantly. When analyzing customer decision journeys [CDJ] for retention versus acquisition activities, it becomes apparent that stores are essentially ‘retention machines’. In other words, while their influence on non-customers is rather low due to very low penetration rates (in the 10 to 20 percent range), they retain strong influence over current customers considering purchasing the same brand again. Such customers visit stores more reliably, with penetration rates in the 25 to 45 percent range.”

Monica Ho reports that “just 22 percent of mobile users complete a purchase directly via their smartphone or tablet.” [“Smartphone vs. Tablet Commerce: 3 Essential Behaviors You May Be Overlooking,” Search Engine Watch, 22 May 2013] In fact, she reports that 68 percent of smartphone users (those most likely to be “showroomers”) still make their purchases in-person. She continues:

“If a retail chain understands that the majority of their smartphone customers will actually make a purchase in-person, they can modify their targeting to focus on users within the vicinity of their brick-and-mortar stores instead of a broad run of network strategy to drive direct mcommerce. Ad creative would then focus on an offline call to action relevant to the various brick and mortar locations, such as a coupon or limited time offer redeemable on premises. By considering mobile consumers’ preferred method of conversion, you can make simple yet powerful changes in strategy and creative that can amount to big results.”

The point is, brick-and-mortar stores needn’t throw their up hands in despair over the practice of showrooming. Even the first generation of so-called “digital natives” still enjoys shopping in traditional stores. “Despite being far more tech-savvy than previous generations, Generation Y, the 80-million strong cohort of Americans between the ages of 18 and 35, has not forsaken shopping in stores for online purchasing — as long as retailers keep their offerings ‘fresh’ and interesting, says a new report from the Urban Land Institute (ULI).” [“New Gen Y Shopping Preferences Revealed,” Consumer Goods Technology, 20 May 2013] In other words, retailers should take heart but don’t get complacent. The article continues:

“The study found that 37 percent of Gen Yers love shopping and 48 percent enjoy it. Half of the men surveyed and 70 percent of the women consider shopping a form of entertainment and something to share with friends and family. The appeal of shopping is particularly strong among Gen Yers who are Hispanic and African American. Gen Yers tend to spread their dollars around generously, the study found, with more than half visiting a variety of retail centers at least once a month, including discount department stores (the retail type most frequently visited by Gen Y), community shopping centers, enclosed malls, department stores, big-box power centers, chain apparel stores, and neighborhood business districts. At the same time, 91 percent of respondents said that they had made online purchases over the previous six months, with 45 percent spending more than an hour a day looking at retail-oriented web sites.”

Shoppers are obviously looking for fair prices and good deals; but, as I’ve noted in previous posts, they are also looking for great in-store experiences (read, for example, my post entitled Retailing Faces a Brave New World). M. Leanne Lachman, president of real estate consulting firm Lachman Associates LLC and executive-in-residence at Columbia University’s Graduate Business School, told the CGT staff, “Contrary to what some retailers have feared, we found that Gen Y still does most of its purchasing in stores. Gen Yers use the Internet to research products, compare prices, envision how clothing or accessories might look on them, or respond to flash sales or coupon offers, as well as to purchase items; they are definitely multi-channel shoppers.” Lachman pinpointed the most important thing that today’s large retailers need to keep in mind — shoppers are using multiple channels on their journey to purchase.


Evan Schuman believes that showrooming has been overblown. He even calls the phenomenon a “myth.” [“The Myth Of Showrooming Takes Another Hit,” StorefrontBacktalk, 15 May 2013] He reports that a recent Bizrate survey of shoppers who made purchases on-line found “an overwhelming 78.15 percent of those online purchasers had not looked at those products in any physical store.” While that figure does shoot holes in the notion “that tons of shoppers are flooding stores to only use them as a physical showroom,” it doesn’t address the situation where consumers do engage in comparison shopping while in stores. Not to worry, Schuman writes, he reports that the survey also looked at the “remaining 21.85 percent of shoppers who had looked instore before buying online” (i.e., the showroomers) and found that “most of them (54 percent) ended up buying from the same chain. In other words, they were in a Target or a Best Buy and then purchased from Target.com or BestBuy.com.” That strengthens Lachman’s point that multi-channel activities are becoming more important for retailers.


Although convenience plays a role in the showrooming arena (i.e., it’s more convenient to buy a bulky item online and have it delivered than to wrestle it home from the store yourself), the bottom line is product price. Ann Zimmerman writes, “Lower prices are one of the main reasons people pick Amazon and other Internet-only emporiums over traditional retailers. If brick-and-mortar stores can’t compete on price, it is unclear how successful they can be with tweaks to merchandising and customer service.” [“Can Retailers Halt ‘Showrooming’?Wall Street Journal, 11 April 2012] Anne Zybowski, director of retail insights for Kantar, told Zimmerman, “Offering people personalized prices through their mobile device may be the most effective way to beat showrooming.” These targeted marketing schemes are much more effective when made while the consumer is actually in-store because they have the advantages of time and location. For large retailers with no counter-strategy, showrooming could remain a problem. Innovative retailers, however, can still find ways to make the in-store experience a preferred path to purchase.

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