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).
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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.