The advanced technology of mobile devices — smartphones and tablets — is giving consumers new powers when shopping at brick-and-mortar stores. These devices allow shoppers to obtain useful information in the right place at the right time as well as generate and share information in ways they could only dream of ten or twenty years ago. However, retailers that operate physical stores take special note of a practice of consumers to use their stores as a showroom for preliminary examination, that is, consumers visit and browse products displayed in a store but then make the purchase of the same product of interest from an online retailer, usually for a lower price — a form of behaviour that henceforth has been named ‘showrooming’. This conduct may indeed be a cause of worry, but it is not an obstacle retailers of traditional stores cannot surmount, and it tells only part of the story of mobile-assisted shopping.
Consumers may perform multiple activities on their mobile device while in a store, like checking on additional technical information on product features and functionalities, compare prices, and consult with product reviews. These types of “market research” for learning by consumers are legitimate and actually should be encouraged — there is no justification nor excuse for retailers to try and block such activities. Especially at this time consumers will resent such action and may not forgive “a rude” shop manager who tries to interrupt their research activities (e.g., by disrupting wireless connectivity in the store’s premises). Moreover, mobile-assisted shoppers expect to be able to communicate through social networks (e.g., Facebook, Twitter) with friends and relatives but also with the store itself, when needed. The challenge of retailers is to tackle the threat of showrooming yet keeping with the new rules of the game, that is, information-rich shopping.
The Centre on Global Brand Leadership at Columbia Business School together with Aimia (a consulting firm on retail loyalty programmes) published last September a research report on “Showrooming and the Rise of the Mobile-Assited Shoppers.“ The research characterises different activities that mobile-assisted shoppers perform, assesses the extent of their utilisation and the business implications. At the heart of the research is a segmentation model comprising five groups of these shoppers who differ in types and levels of usage of their mobile devices during their shopping in brick-and-mortar stores.
A survey of 3,000 mobile-assisted adult shoppers in the United States, Canada and the United Kingdom was conducted online in late November 2012. A shopper qualified for the study if she or he confirmed owning a smartphone or a tablet with a data plan and using the device within the last twelve months to “aid in shopping for a product while in a store (e.g., looked up information or reviews on the product, compared prices, texted or called a friend for advice, etc.),” It is noted that smartphones receive greater emphasis than tablets throughout the report, understandably given the greater penetration of the former among consumers in 2012, but this situation is likely to change in coming years and both kinds of mobile devices are relevant.
We may already get an initial indication of the scale of using mobile devices while shopping in physical stores from the screening stage of the survey wherein it was found that the incidence rate of ‘qualified’ mobile-assisted shoppers (among Internet users!) was 21% — already a significant rate but it suggests that the phenomenon is not yet dominant and pervasive. With respect specifically to showrooming, it is estimated that as many as 70% of the mobile-assisted shoppers (M-Shoppers) showroomed at least once in the past year (i.e., “visited a store to look at a product, and purchased the product from an online retailer instead”). Not less conspicuous, as the researchers point out in their analysis, is the opposite finding that there are 30% of M-Shoppers who refrain from engaging in showrooming.
About half of M-Shoppers report comparing prices (52%) and looking up product information and reviews (50%) regularly (i.e., almost always, frequently or half-the-time) while in-store. Also, nearly 40% report texting or calling friends or family members regularly for advice from the store, an obvious course of action that the M-Shoppers can take, though it does not involve any unique advantages of smartphones’ capabilities and requires no advanced skills. The activities that are truly interesting and do matter, in addition to searching for price and product information on mobile websites, are such as (1) using a barcode or QR code of a product on the shelf (36% have ever done so); (2) posting an update on a social network (24%); (3) location-based check-in (e.g,, on Facebook, Foursquare) (22%); or (4) mobile login to a store’s loyalty programme (17%). It is furthermore important to note that 75% of M-Shoppers report browsing websites of other enterprises vis-a-vis 70% visiting the retailer’s own website, signifying the essence of making the retailer’s website available to patrons in-store as a way of countering their browsing websites of competitors. To this we may add that 42% use the retailer’s app, another important tool that helps to increase the bond of M-Shoppers to the retailers of physical stores.
The primary driver for showrooming is the offering of a product of interest at a lower price from an online retailer (69% of M-Shoppers). But focusing on the lower price of the product item has a catch because the costs of purchase on the Internet include also delivery charges so that in the bill’s total this purchase may not be less expensive. Consumers who get attracted by lower prices online tend to neglect at least in the first moments to consider the additional costs. One of the frequent reasons for abandoning a shopping cart online occurs when e-shoppers reveal the delivery surcharges as they are about to complete their purchase order. Some M-Shoppers do take this into account and declare that they prefer to showroom when the online retailer offers shipping free of charge (42%). On the other hand, main incentives for preferring to buy at the physical store, even when M-Shoppers know it’s possible to buy the product from an online retailer at an equal or lower price, were immediacy of obtaining the product and greater convenience of buying in store; aspects such as customer service and trust are secondary motives.
The five segments can be distinguished, according to the report, as (a) those that pose greater problem or threat to brick-and-mortar retailers (three segments accounting for 38% of M-Shoppers); and (b) those that are less troublesome and even offer more opportunities (two segments accounting for 62%).
The greatest threat arises from M-Shoppers who are Exploiters — they are pre-determined to buy from an online retailer and intentionally enter the brick-and-mortar store only to examine the product closely first hand before making the order online. They truly use the store just as a ‘showroom’. Attention however: this segment constitutes just 6%(!) of M-Shoppers. They are not distinctively driven to purchase online by a lower product price but by free shipping by the e-tailer — free delivery home from a local store to the customer’s home can mitigate the Exploiter’s intention to buy online.
Two segments may be described as “swinging”: they are inclined to purchase online but are not fixed on it. The Savvys (13%) are “calculating but persuadable” — they deliberately search for information and study their possibilities when about to purchase a product, and decide on their findings. The Savvys are especially “digitally-attuned”, referring to various online sources (e.g., 60% researched product information vs. 49% of all M-Shoppers) and applying digital tools more than other M-Shoppers (e.g., 47% searched for online coupons vs. 34%, also 18% paid at checkout through smartphone vs. 10% of all M-Shoppers). The key to reach and persuade them is through helpful information and attractive offers and experiences in the mobile space. The researchers see them as a currently yet small segment of shoppers but strategically important for the future. The Price-Sensitives (19%), on the other hand, tend to be more opportunistic in their shopping behaviour. They do not plan to showroom but will do so once a lower price offer comes around. They are deal-prone and price discounts is the main way to attract them. The researchers suggest that a good tactic for the store owner regarding this segment would be to give them good reasons not to pull their smartphone out of their pocket or handbag.
The most promising segment appears to be one of Experience Seekers (32%) because they are most open and appreciative of retail initiatives, special offers and events that can increase their enjoyment and enhance their shopping experience. Price is just one of the considerations, and not the most influential one. Thus, if a brick-and-mortar retailer organises special merchandise displays and events with celebrity guests, provides personal treatment and better offers to loyal customers, as well as ways of interacting with the store on their mobile device, they have good chances of winning the Experience-Seekers over the e-tailers.
Last, the Traditionalists (30%) are basically more conservative M-Shoppers who prefer to shop and buy in physical traditional stores and who make less use of technologies of their mobile devices: they prefer shopping locally (34% vs. 19% of all M-Shoppers), trust physical stores more (27% vs. 14%), expect a better store return policy (23% vs. 15%), search less for product and price information (32%-34% vs. 50%-52%), and did not showroom in the past year. They are relatively less likely to have a tablet with a data plan; their more likely usage of the smartphone is apparently for consulting with friends and family members. As the report indicates, they are the least threatening segment to retailers of physical stores.
The segment of Exploiters is relatively a little larger in the UK (9%) where they may present somewhat more trouble to retailers; overall the three more problematic segments in the UK account for 46% of M-Shoppers compared with 35% in the US and 32% in Canada. The Experience-Seekers are the more prevalent in the US (36%) while Canada is distinctive by its high share of Traditionalists (43%!).
There is no mention in the report of the proportion of ‘showroomers’ in each segment nor of their frequency of doing so. Thus it is not known how segments differ in their extent of showrooming except for the fact that there are no showroomers among ‘traditionalists’ while in other segments M-Shoppers showroomed. This is a peculiar shortcoming of the report.
Competition between retailers that operate brick-and-mortar stores has always existed, and in fact shoppers may visit the website of another competing traditional retailer just as they visit the website of an e-tailer operating only an online shop to check on products available and their prices. Visiting the website of a competing traditional retailer would not change essentially the competition compared to visiting the physical stores. The particular concern of retailers about exclusively online e-tailers arises because the latter do not invest in constructing physical store environments and in setting-up appealing displays of merchandise, primarily for familiar and leading brands. It looks as if e-tailers rely on shoppers to scrutinize products closely at a physical store without making an effort of their own. It is widely agreed already that medium and large retailers need to have a website (regular and mobile-supported) to accompany their physical stores, but there are issues at question hanging over selling also online — how and to what extent it should be done, for instance:
- Allowing M-Shoppers to access the online shop of a retailer while in his store and complete their transaction there may not matter to the retail business as long as revenue is generated. However, it could upset store managers that do not get this store-associated revenue attributed to them (e.g., for their prestige as well as bonuses). It may also cause sub-employment of their staff in-store.
- Offering products in the online shop at lower prices than at their physical stores may draw M-Shoppers from referring to an e-tailer but it would discourage them from buying in the store even further.
Therefore, retailers need to work-out carefully the relationships between their physical stores and their regular, as well as mobile, website. Patrons of the brick-and-mortar stores should be served separate special offers not available to those who buy online; they may also be offered physical gifts, rather than price discounts, that only the patrons can enjoy immediately in-store. The report mentions that Walmart launched in recent months a geo-location mobile app that can identify and suit offers specific to the store a customer visits. Geo-location apps and mobile websites accessible if and only if customers are in-store may aid in two important ways: (1) Allow purchases made through an app be assigned to the relevant store where the app was used; and (2) The app or website admits a customer-patron to a loyalty programme where she receives deals and other benefits exclusively when in-store, whether she buys through the app/website or at the store’s cashier.
There are many possible avenues of action for retailers to overcome the threat, or rather the challenge, of showrooming. They can capitalise on advantages particular to the constructed environment of a brick-and-mortar store along with interacting through various forms of behaviour assisted by mobile-devices to attract and persuade M-Shoppers to complete their purchases with them, in-store.
Ron Ventura, Ph.D. (Marketing)