How to fend off ‘showrooming’
Note to vendors: “What we aren’t willing to do is let online-only retailers use our bricks-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands, create a superior guest experience, provide hundreds of thousands of jobs, and support local communities.”
So said US discount department store Target, in a strongly worded (and then carefully leaked) letter to its manufacturer brand suppliers earlier this year.
Digital Shoplifting. Showrooming. Whatever you call it, it’s disheartening and damaging when shoppers use your store to check things out, suck your salespeople for knowledge, then whip out their smart phones and buy their selection at a better price on the net.
In an age where the customer is in control (and loving it), showrooming is not going to go away. In fact, according to the Wall Street Journal (WSJ), “half of shoppers who buy products online first checked them out in a traditional store”.
So… deal with it.
Here are five strategies for overcoming one of the greatest threats to retail today:
- Sell different stuff. First and most obvious, ensure that you stock well-differentiated merchandise. Push suppliers to offer you more exclusives. Develop your private label offer. Avoid comparison at all costs.
- Level the playing field. Sure it’s tough to match Amazon. But you’d better get damn close. My guess is that you can only expect a 10 to 20 per cent premium over an e-commerce competitor at most. And make sure that your own online prices match your store prices. As much as possible, take price differences out of the equation.
- Point your customers online. As reported in the Wall Street Journal last week, Walmart is now encouraging its sales associates to refer customers to Walmart.com if they can’t find what they’re looking for in store. More and more retailers have terminals or iPads at the ready dedicated to capturing the sale on their own site if it’s not possible to convert customers at the cash register.
- Improve your ‘click and collect’. Not every customer wants to wait for a purchase to be shipped to him from an online retailer. You can play to that urge by dedicating space in store to ‘click and collect’ – pick up purchases made on your website.
- Change the pricing model. In its letter to vendors, Target outlined that it was considering ‘subscription pricing’. The idea is to give customers bonuses if they agree to a regular purchase. (Newspapers, magazines, book clubs, cable TV and Foxtel all utilise the subscription model.) Amazon already has in place a ‘Subscribe & Save’ program, where shoppers enjoy automatic replenishment of basics (like paper towels and detergent), discounts, free shipping and an option to cancel anytime.
While it’s not going to work for all retailers, the “lock ‘em in or lose ‘em” approach of Strategy 5 has some merit. And you can use the same philosophy by building a great loyalty program that raises the barrier to exit to customers tempted to stray to an online opponent.
Treat the five strategies above as thought-starters. And get your plan in place to keep your customers within your four walls.