ShowroomingGerald Trites, FCA, CPA
A new phenomenon, driven by technology, specifically smartphones, is causing retailers to change their marketing and selling strategies. It’s being called Showrooming, and relates to the practice of a growing number of shoppers to go to stores, and compare the prices to online prices and buy at cheaper prices online rather than in the store.
The store bears all the considerable cost of holding the goods in stock and on display, but loses out on the sales. Obviously a problem.
Some, like Best Buy, have initiated policies that they will match the prices of the competitors. But this may not be a sustainable policy, since the online competitors do not have to bear (and recover) the costs of their showrooms. Often they just have a warehouse in some low rental area or in some cases do not even make the goods until an order comes in.
But there is always a policy basis for acting in these circumstances. Embrace the technology that is causing the problem and find ways to add value. Walmart has tried that, with some success, with their instore mode app for smartphones, which enables customers to find if the goods they seek are in stock and also exactly where they are located on the store. There is value added in that simple function, since locating a product in a big store can be one of the most frustrating aspects of shopping.
Other ways to deal with the problem include providing customers with the opportunity to buy in the store using their smartphones. Again, there can be value-added. Customers can buy the goods and if properly set up in the store, just take them out without going through a checkout lineup perhaps by scanning an electronic receipt received on the smartphone. That is a case of embracing the technology and adding value at the same time.
Technology has forced companies to adapt and innovate continuously since the technology revolution started. It shows no signs of slowing down, rather it is accelerating.
So look for a lot of innovation in the coming year, as retailers learn to deal with showrooming, and related trends.
Posted: December 27th, 2012 under General.