When shoppers hit the stores Thursday night for the official kickoff of Black Friday and the holiday shopping season, many of them will be entering armed with smartphones.
They will be using the devices not just to post pictures of themselves on Facebook, but also to “showroom”: the practice of examining a product in a store and then comparing prices for it — and perhaps even buying it — online.
In some ways, this sort of comparison shopping has always been around, albeit in a more rudimentary form. But the immediacy of smartphones, a host of price-comparison apps and fierce competition from online retailers have helped usher in a whole new era of price transparency that initially caught many retailers off guard.
According to a recent survey by Accenture, 32 percent of consumers said they end up buying products online from a different retailer after first viewing them in person at a store. Only 20 percent of shoppers said they make their final purchase in the store. Most of the others surveyed said they would buy from the website of the store they visited.
People are also reading…
Showrooming has been “definitely a wake-up call for retailers,” said Stephen Wyss, a partner in the retail and consumer products practice of BDO USA. “It has made bricks-and-mortar retailers shift their strategy and focus on customer service and the in-store experience, making sure it is something the consumer is going to remember — something they’re going to enjoy.”
In addition, retailers are fighting back this holiday season with a host of price-matching programs. For the first time, Target will match online prices of four retailers — Amazon, Toys R Us, Walmart and Best Buy — through Dec. 16. It is also doing the same through Christmas Eve for competitors’ printed ads for in-store prices.
Best Buy, which usually only matches in-store prices of its competitors, also has expanded its program during the holidays to include certain online retailers such as Amazon.
However, many of these retailers are not matching prices during Black Friday.
“We want to make sure our guests this holiday season feel as though they are getting the best value,” said Sarah Van Nevel, a Target spokeswoman.
On top of that, she said that Target offers an in-store experience that is unmatched by online-only retailers. The stores have an array of exclusive toys and merchandise as well as holiday stations with stocking stuffers and gift ideas.
In a conference call with investors last week, Target’s chief executive said Target’s pricing is “so good day in and day out” that the retailer doesn’t expect a large percentage of consumers to take the retailer up on its price-matching offer. But he said the retailer wanted to do it to give customers confidence that they were getting the best deal.
Brian Yarbrough, a retail analyst with Edward Jones in Des Peres, said showrooming is not as big of a problem for the likes of Target and Walmart, where many consumers probably won’t bother to match prices on a lot of everyday items such as laundry detergent.
“Best Buy is probably the most susceptible to showrooming,” he said, noting that the struggling retailer specializes in big-ticket electronics such as TVs that people often compare prices for online. “I can’t quantify how much it has hurt their bottom line. But they know it’s going on.”
While price matching can cut into retailer profits, many are willing to do it to build customer loyalty and to hold on to the sale, Yarbrough said.
Best Buy executives brought up showrooming at an investors’ conference last week.
Hubert Joly, the new CEO of the electronics chain, said an estimated 15 percent of the people who visit a Best Buy plan to make their purchases online.
But he said that the retailer has a unique opportunity to close the deal when people walk into a store. He added that 70 percent of Americans live within 10 minutes of a Best Buy store.
“Once the customers are in our stores — candidly, they are ours to lose,” he said, according to a Bloomberg transcript. “And we have many tools to meet their needs including our highly trained sales employees, unbiased competent advice, unique service capabilities and competitive prices.”
Indeed, many retailers say they are not as worried about showrooming anymore. In a recent survey of the chief financial officers of the largest retailers in the U.S., 88 percent of respondents said they did not see showrooming as a threat to their business.
Wyss said a couple of factors have helped mitigate some of the concerns.
“You have a significant advantage if they’re in your store and they have already done some research,” he said. “They want to see it and they want to feel it. Then you have the ability to close the sale ...”
Price matching is one strategy that helps build trust with the consumer.
“It’s about trying to gauge the psychology of the consumer,” he said. “If you build up enough goodwill and trust for everyday items, they might not look to browse 20 or 30 different sites because they trust that your prices are very reasonable.”
Of course, online-only retailers still have the advantage in many states, including in Missouri and Illinois, of not having to collect state sales taxes.
But Jason Buechel, a senior executive in Accenture’s retail practice, noted that physical stores still have a leg up in other ways such as easier returns and exchanges especially for items given as gifts, which of course are a big holiday draw.
As traditional retailers continue to feel the pressure from online retailers, he expects to see stores expand their assortment of private label and exclusive merchandise. He said stores also will cater their merchandise to more local tastes.
“That is something that will be hard for an online retailer to be able to compete with,” he said.
