Will 'showrooming' kill businesses?
cnn.com
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Years ago a 15 year old version of myself ventured into a few stores looking for an HD TV to go with my PS3. I was already pretty knowledgable about the TVs and I had found a few online for $600-700 (At the time, this was pretty much as cheap as they came) that seemed decent and I wanted to take a look at them in person before buying one. I think I went to Walmart, Best Buy, Target, ABC Warehouse, and finally Circuit City. At almost every store the "salespeople" knew almost nothing about what they were selling and there products were way too expensive for what they were. The only store that stood out to me was Circuit City. Not only did they have a good selection of quality TVs but the salesman I spoke with impressed the hell out me as he was the first that knew more about the TVs than I did. After I told him I was going to use the TV with my PS3, he grabbed an open PS3 from their storage room and hooked it up to a few of the TVs so I could try them out. I was so impressed by the level of service that I went back to the store the next day and bought an $800 TV (I think it was available online for $750 at the time) and I have never regreted the price difference.
As long as brick & mortar retailers can offer service beyond what an online retailer can do, they will do fine.
Not sure what that means in this context.
But the way I see it, a customer will enter their business and identify products that are of interest. Those people have the technology to compare prices in real-time in that store. If that price was no more expensive, what incentive would a customer have to not buy it there an then from the store?
In the UK I've felt the quality of a customer experience has gotten worse. Staff ignore you when you are actually trying to find a product, but bug you when you're 'just browsing'. More often than not I'm left with the feeling that they just don't want my money by the lack of helpfulness.
Brick and mortar businesses are selling a service, not just a product. That service is a person to help you, products to see in person before buying and stock to buy immediately. But at the end of the day, it will probably come down to price. If they simply can't compete on price, then the outlook doesn't look good.
Can't tell you how many times I've walked into a store in the US lately and have come out citing to my wife the same old saying that obviously that store 'is not in the business of selling'. No service, ridiculing you, venting their frustrations at you. It's just a horrible experience all around.
So often I have been in Comet/Currys/PC World etc and seen older people told they need a £40 HDMI cable, or "this is the last one in stock, it's a great price - shall we go to the paperwork" etc.
I think they know their market and don't want waste time on people who know the real prices of items, who are willing to shop around, haggle and so on.
I find that sort of thing really irritating. It's mis-selling, and as such it is almost always illegal, but it's close enough to plausible that most people who would be in those stores in the first place won't be confident enough to challenge it.
There's also a certain arrogance about some stores these days, and not just the ones staffed by 12-year-olds. I went to buy a new iPad a few days after they launched. Apple somehow seemed to be price-fixing without getting called on it, because everywhere was charging the exact same price for a high-value, prestige product in short supply, which doesn't sound like a competitive market to me. Still, I figured if those were the rules of the game then I might as well go where they seemed most likely to have stock: the Apple store.
Two Apple staff eventually asked if they could help me. I told them exactly which model of new iPad I wanted. One said that he didn't think they had any in stock and wasn't sure when they'd be back in, but he'd go and check. He came back several minutes later, having apparently sent someone else off to check the stock for him in the interim, and proudly declared that he was right: they really didn't have the product I wanted that was advertised all over their window display, and they really didn't have a clue when it would next be available. Then he grinned bizarrely, as if I was supposed to be impressed by his awesome level of customer service or something.
I walked next door to John Lewis, where I easily found a friendly member of staff, who in turn walked about five metres to a terminal and told me within about ten seconds that they did have what I wanted. She then personally went to the store room and returned two minutes later with the correct box, personally checked that she really had found the item I wanted, and put it behind the till reserved for me until I was ready to leave.
Guess where I'm going next time...
For example, they could start asking brands not to allow online sales if they want to be stocked; I can easily see the more expensive brands only being available off-line. Or they could ask people who enter the store to pay for a redeemable voucher.
The suppliers aren't stupid, they see where this is going. Any wholesaler who agrees to that clause deserves what happens next – being overtaken by their more forward-thinking competitors.
And, as a consumer, I sure as hell am not going to pay a brick-and-mortar retailer for the "privilege" to shop in their store.
So, it can be a matter where maximizing your revenues now can hurt you in the long run. But, most importantly, as brick and mortar outlets fight for their future survival, somebody could choose to let go of his online sales to win a decisive hand in the traditional channel.
As a manufacturer, I don't see how shutting down my online presence would benefit me. Simplified, there are three types of customers. The first shop in traditional stores, find what they like, and purchase it. The second browse and purchase online, without ever seeing the physical merchandise. The third browse traditional "showrooms," then proceed to buy from a cheaper online retailer.
With an online and traditional presence, manufacturers capture all three types of customers. If you limit yourself to traditional stores, you force the third type of customer to purchase in-store, because there is no cheaper online alternative. But those customers would buy online anyway, so you gain nothing. And you've completely lost the second type of customer, who only shops online. A simplified model, perhaps, but the principle stands.
I'm honestly not too worried. I like going to the mall. My mother practically lives at Target and Wal-Mart. Many of us like the physical act of shopping, enough to sustain physical retail outlets. Profits may shrink, but that's the free market. You've got to keep innovating to stay in business.
1) Amazon, Newegg, etc come out and say "we love local businesses" - because honestly, who doesn't have their favorite local shops, knowledgable people who know you is great. They admit they have been hurting local businesses, and that they have an unfair advantage because of this show-rooming behaviour by consumers.
2) They roll out a "showroom affiliate" program. Businesses can sell the products, but they also can have a QR code or similar, with a "or get it on amazon!". This provides a commission to the store, recognizing that they played a part in the sale.
3) the show-rooming is not as harmful to the stores, the online retailer doesn't lose sales, and everyone can settle to a new balance.
This also gets the online retailers good press and warm glowies.
Before computers and databases, it was a valid excuse to say that merely calculating sales tax was burdensome for a retailer. Today, calculating and collecting sales tax is trivial--there are dozen of SaaS providers for online retailers, including Amazon itself.
As well, it wouldn't matter, because the price differences on most items would still be a lot more than the sales tax. No one would go online if the only difference was 6% or 8% sales tax. We are talking 20-30% differences in some cases.
What you may be talking about is the use (I call it property tax) tax that some states wish to levy on property that comes into the state and remains in the state. I agree, there would be no difference between items regardless of their origin in such a case.
However, fundamental to Quill was the burden that calculating a sales tax would impose on the retailer. In the times of Quill, incidental sales (in the case, less than a dozen over several years) to customers in North Dakota were not enough to justify the burden of imposing a sales tax; it would have cost Quill more to figure out the sales tax owed than Quill would make from the sale.
But technology has changed. The concerns raised in Quill are non-existent today; it is trivial and dirt cheap to calculate and collect a sales tax for all taxing jurisdictions in the U.S.
Amazon knows this; that is why it has always backed down when states threaten to pursue this issue in court (i.e., NY, Cali, and Texas). Indeed, Amazon now offers a sales tax calculation service to smaller etailers.
Note that most legal commentators agree that Quill could easily (and probably would) have gone the other way if the catalog company in the case had sold to more than a handful of customers in North Dakota.
This has been coming since the 90s, but I bet it will still take a long time to move on. What is unclear is how much this will impact employment: there's a good chance that new models will not require the same (massive) amount of labour currently employed in retail.
There will most definitely be a tipping point where the brick stores will see most of their revenue disappear to online shops ... regardless of showrooming happening in their stores or not. Online is just the way to go.
The only real alternative for those is buying multiple items and then returning the ones you don't want; I wonder what's the efficiency of one versus the other, in terms of time, money and energy.
It's still a win/win since they won't need to hold stock and multiple vendors can share the same locations. So it will still be a lot cheaper than the current way of doing things.
But you have a valid 'wondering' :p I wonder the same.
This is very disappointing after the experience of online shopping.
If they want me to buy, then they should help me make a decision, and that means making it easy to compare ratings and reviews from the web. Show reviews up front. Put an honest summary of product ratings on the shelf. Don't pretend like everything you sell is great. The reason I buy online is because I can make a relaxed and informed decision. If you enable that in a store then I can both handle the product and make a decision. That's when I am most likely to buy.
Also, I am personally offended when electronics stores try to sell me extremely marked-up accessories like HDMI cables. I would spend $10 in a store if it cost $5 online. But I will not spend $40 or $80, because I know better, and when you only give me terrible rip-off options then I can infer that you don't respect me, my money, or my intelligence.
I think retailers can combat that in a few ways, but its effectiveness will vary by industry.
1. Have amazing customer service. Sales people who know and understand the products and not push a bunch of useless extras. People still like to buy from people, not robots (includes brain dead sales people)
2. Carry mostly only store brand merchandise (See furniture stores like Crate & Barrel or West Elm). If you want a particular product, you have to buy it from that company, either in store or online.
3. Carry products from manufacturers with tight price controls (See Apple). Retailers used to try to get around manufacturer price controls to have a lower price, but now that might actually work for them.
Still, I don't feel sorry for the businesses getting "showroomed" that's the point of a free market, if someone does it better, they should get the business, go and adapt yourself and stop bitching about it.
The trouble is, the on-line businesses aren't doing it better. In fact, they aren't doing the hard part at all.
go and adapt yourself and stop bitching about it.
Easier said than done, that one.
I think we're going to see shifts in the retail landscape over the next few years as more and more things are available on-line, because bricks 'n' mortar stores do have some advantages of their own that no on-line store can ever fully match:
* You can try out a real, physical product, even examining the exact item you're going to buy if necessary.
* You can take it away with you immediately.
* You can interact with real people face to face for advice or if there are any problems.
There will always be a certain kind of customer who values these things. I know, because I'm one of them. I don't want to buy a $1,000 monitor and find it has dead pixels and some legalese small print makes it my fault. I don't want to buy some jewellery as a gift and then find it doesn't quite match another item the recipient already has. I don't want to buy a pair of trousers and find this make uses slightly different sizes to whoever I bought from last time and the new pair doesn't quite fit. I don't want to buy a gift for a book-lover and find the cover got torn a bit in the mail. For items like these, where the exact details and quality matter and it's worth the time to make a careful purchase, there will always be a market for real stores that provide good customer service and convenient access.
On the other hand, city centre stores that are staffed by unpleasant teenagers who think customer service is not shoving you out of the way more than three times in a visit, which sell commodity junk for cheap prices anyway, and where you have to queue for half an hour to get to the car park, pay a small fortune when you get there, queue for another twenty minutes to get to the till in the store, and then get told that the special offer on the sticker doesn't apply because it's Wednesday... Well, those stores are toast, and good riddance. If I want poor quality products, ambiguous pricing, non-existent customer service, and unreliable support in the event of any problems, at least I can get that from the comfort of my own home these days.
If a retailer has low prices relative to their competitors, can give you what you want now, or ship it to you free within 2-3 days if they don't have it, they are successfully competing against online shopping IMHO.
We might also see exclusives (time and chain based), and may even see more vendor showrooms. Sony, Apple, and others successfully operate stores which give users a chance to try things out in person.
I'm very curious to see how this will play out - or if it will matter at all.
This is already fairly similar to how high-end retail for clothing works; each boutique will have an item or two that is unique to their store, or done in a special colourway that can only be found there. The largest brands also operate their own stores already, go to any high street in a major city and you'll find LVMH and PPR brand flagship stores
Apple is also a special case in that they control pricing of their goods with an iron fist and never allow discounts. The largest reason for "showrooming" as discussed in the article was the delta in price between a B&M store and online - with Apple your choice is "$cur and the product now" or "$cur and the product later"
I was in the market recently for a high-end camera and it would've been really bad for the OEM to have different codes for it in different countries let alone different stores because it meant it would've been too hard to do research.
The cost to the OEM would be too high to bear to appease the mom & pop store at the other end, at the end of the day they don't care who retails their unit as long as they ship more at the wholesale rate.
Reasons:
-- I usually need them ASAP, -- figure they have not been drop-kicked to my door, and
-- I was told by a friend of mine that BB pays extra to have better quality drives (all drive manufacturers use statistical methods to determine the quality of a batch - the highest quality is sold for more). He is in a position to know, as he has worked for several large drive makers at a top level job(though not as high as VP level).
I remember hearing about it in the 1980s, then it was quite common for a person go to e.g. a camera shop and do a lot of comparison shopping and talking to salespeople, then say "I'll think about it" and go home and order their choice from Adorama.
Salespeople would feel used, and rightly so I think.
If I go to a retail store to look at an item, and decide I want it, I will buy it there. That to me is fair compensation to the retailer who has provided me with value (having the product physically available for my inspection).
Retailers need to find a way to present the product better (live interactive demos, friendly sales staff), have a better returns policy or servicing (many offer 30 day phone support now), and they need to convince the consumer they need this item now, rather than later. (Now vs having it shipped)
All of the complaining about show rooming is distracting retailers from making the changes necessary to make this actually beneficial for them.
Really expensive goods of any kind need to be the best I can get. I'm never walking into one store, and buying anything that costs more than a couple of hundred dollars. I'm shopping around. And this happened long before the Internet.
However I end up cross-buying - usually gifts for other people bought at the last minute where shipping isn't an option.
If you are running a bricks and mortar business you have never been able to compete on price. You have to compete on service. Talk to the people taking photographs, be welcoming to them. Tell them about your returns policies, offer onsite expertise, advise them on where to find cheaper items online and then point out that they pay more from you because they can inspect and test the exact item they are buying before purchase so that they know they are not buying a dud. And the excellent after sales support you offer, in person, in a nice environment. Get involved in your customers purchases. Ask them why they are buying that and what they are using it for, then tell them what they could buy that would be better, based on your professional experience. And don't be scared to recommend a cheaper option from your stock if it is more suitable for them, as this will bring customers back time and again.
Whatever you do, do not get pissy with the browsers. It will not end well.
I'm probably over-extrapolating, of course. The reason I hardly ever buy online is that if I've already decided I want something then I'm willing to throw in a few extra dollars to get it now rather than later. I can't be the only one who feels that way. There are some things which will continue to be much easier to buy instore than online.
That said, you have some big box stores flourishing, like Costco - why does Costco thrive while Best Buy struggles? I think it's the experience at the store, history with the store, and general approach.
As for what will happen to the malls, I couldn't care less. 'though I don't expect those near me to become abandoned any time soon - apparently people enjoy spending their Sundays in a noisy building full of people and eating fast food.
I don't think that's a problem. It's evolution. Like no one today misses spice and salt caravans traveling the silk road not many people will miss brick and mortar shops in the future.