How Businesses Can Fight Back Against Showrooming

Showrooming is the strategy used by every cost-conscious shopper these days: checking out goods for suitability at a physical retail store, but then shopping online to find the best deal. It's difficult for any Australian to compete on price with a giant like Amazon.com, but that doesn't mean it's impossible. Here's what to do (including why price matching is a bad idea).

Picture: Getty Images

Gartner analyst Robert Hetu discussed the issue in a session at this week's Gartner Symposium 2013 event. His key point? While some people will always be drawn to low prices, solid customer service remains the most important strategy.

That's not to say there aren't challenges. "Amazon in particular has been convincing people for a long time about their pricing capabilities," Hetu said. "They have a tendency to continue to operate making no profit whatsoever. It's certainly a challenge for everyone." But price is only part of the problem.

Research conducted by Gartner over 18 months with 10,000 consumers in 10 countries underscores the point. "Consumers really do appreciate the enhanced shopping environments of physical stores," Hetu said. "Consumers overwhelmingly prefer to browse and purchase in a store, taking possession immediately. The store is still critically important."

Two factors dominant consumer expectations: pricing and availability. In other words, if you charge way more than an online rival or you're out of stock, your customers will feel entirely justified in going elsewhere.

"Elsewhere" is not a purely online phenomenon, however. Around a quarter of customers who actively used showrooming as a tactic ended up heading to another retail store, rather than to an online shop. "Showrooming involves not just your online competitors, it also involves your offline competitors," Hetu said. "It's all about the customer experience."

One key strategy? Be upfront about pricing: don't force customers to ask what it is or incorporate weird delivery prices. Online stores display prices immediately; you need to operate with similar procedures.

A price matching strategy might also seem appealing, but Hetu advises against it. "Consumers aren't necessarily persuaded by price matching. 94 per cent of consumers want a pricing policy that doesn't require them to do research. There's a feeling the consumer is taking on the reponsibility of the retailer to set pricing appropriately.

Another big no-no? Having different prices in online and real-world stores. "The message going to the consumer is a lack of trust. There's an issue around trust which is at the heart of showrooming activity. Transparency will boost the long-term value of a customer. We have to take advantage of the consumer's desire to shop in our stores and get the product immediately and have a more trustful relationship."

More extreme strategies are possible, as we saw earlier this year with the Queensland store which charged a browsing fee for customers who didn't purchase anything. That might be feasible with a highly specialist retail outlet, but in a competitive market few business owners will want to risk alienating their customers to that degree. Stick to the basics and your odds will be better.


Comments

    Another big no-no? Having different prices in online and real-world stores.. Petbarn is a serial offender of this practice. ( from my experience, prices instore are the online price + online delivery charge of $6.95 + 5%. ) The 17yo ' assistant manager ' told me that www.petbarn.com.au is a separate business from the retail stores and the online prices don't apply in store because of wages, rent and power.... I asked him if they actually pay him to rattle off that BS or does he do it for free ... looked like he was going to cry.

      Was actually telling the truth, most big corporations do that. Friend works at Harvey Norman and same deal. You didn't have to be rude about it.

      I work in retail and our online store is a separate entity too, it's the norm. Having the extra costs of being in a brick and mortar store is no bullshit either. Why would he lie to you? Not like he's on commission or anything and desperate for the sale.

    The 17yo looked like he was going to cry because he told you the truth (as he knew it) and you were disrespectful in return. Corporations that sell through both online and physical stores actually treat them as separate businesses. The two businesses interact in many ways, but they exist as distinct entities.

    Last edited 31/10/13 3:07 pm

    I think a number of businesses fail in customer service. Not because they're rude, but because they're too confident and cheerful, and sometimes outright lie.

    This year I bought a new camera from Harvey Norman (I had to, work related reasons) and the salesman tried the ol' "Were you going to let this man drive out of here on unsafe tires?!" routine, telling me that a friend had grey-imported the very same camera I was looking at, and it arrived on his doorstep smashed up because it had no product box, no bubble wrap or anything -- it was just a loose camera in a cardboard shipping box.

    I would have grey imported, but being a $4500 camera that would be used for work / home business, I had to get it locally (or work wouldn't let me salary sacrifice it)

    Good customer service is pretty hard to find these days. If I get good customer service while looking at stuff and I like it, I'll most likely buy it, or if I can't afford it today come back.

    If I help myself in a store where nobody cares, or the staff are rude, but I like the product, I'll probably go home and check the price before I bother going back.

    It also sucks when you get a choice of one or two colours in Australia, or 90 colours in America (Nike). I still however bought my shoes in one of the two terrible colours available from the Athletes Foot because they had great customer service.

    There's a difference though between paying more for good service, and paying an Australian tax. I'm not paying $1200 for a suit in Aus which is $600 in the UK because it's "last season" over there, and I'm not paying 3k in Aus for a laptop which I can grey import for 2k.

    Tips for bricks&mortar retail that this article could have covered:

    1. Research the products you sell, online. Price your physical goods no more than 30%, or $100 more expensive than the online stores. Provide good customer service.

    People will pay a premium to have something now, that premium depends on your customers and your product, but two general rules are: not more than 30% and not more than $100.

    2. Open an online store and expand your reach.

    If you have stock, staff, expertise and a unique product, you need a website, contract with a courier, and to tech your staff how to put stuff in boxes. It ain't rocket science. You are in a perfect position to compete with online companies, and have better 'street cred' than most of them thanks to your physical address (not PO Box), the fact that you are in Australia and pay GST. Express shipping means you have a considerable edge over offshore competitors.

    3. Get real, "Showrooming" is a good thing, when it comes to exposure, any attention is good attention.

    You tell me, who of these two people are more likely to buy from you? The person who comes into your store with the intention of buying elsewhere who browses your goods and tries them on, or the person who doesn't come to your store at all?

    4. Plan to move out of that shopping centre.

    Your need for high margins is likely a direct result of the astronomical rent you are paying westfield/lend lease/centro/etc. If you need the foot traffic to survive, because you don't sell anything unique, just accept reality, you're basically working for your landlord, and will be until the day you retire or go out of business due to decreasing profit margins. Accept this fact, or change your business so you can free yourself from your landlord.

    5. Loose the victim complex.

    EBay Traders pay at least $10 postage, 10% eBay Fees and 2.5% merchant fees on almost everything they sell. If you had access to the financials of a successful eBay business you would probably find they pay their courier about the same amount you do in rent. If they're in Australia, they're paying GST, just like you. They operate in a fiercely competitively marketplace because they are listed right beside their competition. You will find by executing point 2, the grass isn't that much greener in e-retail. They just have a higher volume of customers than you, and lower staffing requirements because of the non-real-time nature of e-retail.

      All excellent points. Anyone with a boss who's set in his ways like my previous employer should be using this information to counter their misguided excuses. Kudos!

    People react as if physical stores are gonna disappear. I'm an avid online shopper for clothes for more than one reason: price, style & season. But I cannot look past trying an item on, to guarantee I will like it. This is especially for sunglasses, pants or shoes. Shirts & jumpers/jackets are generally safe purchases online.

    Online will never be able to surpass that part that the physical retail industry offers. Sure overnight shipping or free returns will help cover a lot of it. But shoppers do want something instantly, along with satisfaction of an item fitting, or a product working and being genuine.

    I can't say I've ever done this 'showrooming' that is apparently an issue. But that is the retailers fault - offer a better shopping experience to the guy down the mall. Price-matching does benefit. But everything needs to work: price, customer service, competitiveness and stock.

    I shop online because a lot of trends or styles or even brands, are slow at reaching Australia. It's the same reason why the retail industry has suffered A LOT here than other places. We're too slow at accepting new trends (not just style trends, but business trends etc).

    Myer and DJ - the largest retailers of their kind in Australia - both have horrible online experiences. Fact of the matter is online is going to get bigger and more popular, that doesn't mean these companies need to allow their physical businesses suffer. It's called adapting.

    ASOS is a wonderful business model for online fashion. They don't NEED to, but I see them in the future expanding to the extent they have Aussie warehouses where some of the stock will come from here, than the UK. That will hurt Aus-owned retail companies even further.

    Surfstich have a great online experience - great pricing, live chat with workers, great returns and shipping policies. However they cater to surf & skate. The Iconic is probably the closest thing in Aus to Asos, but they cater too heavily to designer brands which is why they're suffering.

    The retail industry need to adapt and accept online shopping, rather than continuously fighting it. It's as old as newspapers fighting the Internet. It's the Internet - it's unbeatable.

Join the discussion!

Trending Stories Right Now