“You can have the store serve as the showroom and communications centre for the website,” says Wharton professor of operations and information management Marshall Fisher. And while he notes that such an approach could certainly further erode sales in the physical stores, that result may be an acceptable tradeoff to some companies. “One retailer told me they were seeking to improve their online presence – and I asked whether that would cannibalise the stores,” Fisher recalls. “His response was, ‘That is OK – online is cheaper for us anyway.’”
The blurring line between the physical and online world reflects a shift in consumer expectations, says Jatlow Levy. “We are in an omni-channel world,” she points out.
“Today you have to be present in all channels to be successful. As a result of showrooming, a physical store may lose sales to an online value price player, but it is also possible that some physical-store sales are merely shifting to the retailers’ own online and mobile channels.” No surprise then that even computer giant Microsoft is now opening its own retail stores.
Jatlow Levy says that finding multiple points to connect with consumers builds loyalty. Research has shown that on average, consumers who shop through a retailer’s physical store and website spend twice as much as those who shop via just one channel.
In addition, the customer who shops through three channels spends four times as much as the solo channel shopper. “You originally opened the store to sell a product,” Jatlow Levy states. “But in an omni-channel world, the store may become a marketing expense, a tool for generating buzz or a way to provide service.”
At the same time, retailers are also trying to build a product line of unique offerings. “The only way to get protection from showrooming is through exclusives, so that the only way to get that product is through one retailer,” Hoch says.
In addition to asking its regular vendors to come up with one-of-a-kind products for Target stores, the retailer is also teaming up with small boutiques across the country to create The Shops at Target – a series of exclusive apparel and home collection items from these independent stores that are offered for a limited time at Target, as well as on the Target website. Toys “R” Us is rolling out a new tablet for kids, the Tabeo, an exclusive product that consumers would not be able to find more cheaply online. “It is our strategic position to offer products that you can’t find anywhere [else] or be compared on price,” Troy Peterson, a vice-president at Toys “R” Us, told The Wall Street Journal in September.
Wharton marketing professor Z. John Zhang suggests that showrooming may also prompt some retailers to completely rethink their business model. He says this will lead to the adoption by some players of the “store within store” format where retailers essentially rent space out in stores to other vendors.
“If you go to Asian countries, most retailers there are really real estate property owners,” Zhang says. “Those vendors pay both a straight rent and also fees based on sales revenue. If you do that, you can control for the showrooming effect because if customers go to the store [to browse] but buy online, you still get rent. In addition, vendors themselves do not mind the showrooming effect, as long as consumers buy their brands online or offline. I think that is the future.”
Zhang points out that the showrooming trend cuts both ways: in some cases, it actually benefits bricks and mortar stores. “When you try to buy a plasma television, you may search online and learn a bit about the TV. But you may want to see it and buy it right away, so you go to a bricks and mortar retailer. This is the reverse of showrooming – bricks and mortar stores are not always on the short end of the stick.”
Certainly, online retailers are aware of this. Some online players such as eBags and Blue Nile have linked up with the delivery service ShopRunner to give their customers the option of picking up online orders at nearby shops. It is yet another sign that the battle between bricks and mortar and virtual retailers will continue – with shoppers reaping the benefits.
This article first appeared on LeadingCompany. Download your free LeadingCompany eBook “10 Key Considerations for Succession and Business Exits”.
