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Brick-and-Mortar retailers are in trouble with online retail becoming mainstream. A signifiant part of that trouble are customers testing or trying on the merchandise and than buying it online, cheaper. It may not be the end of brick store but showrooming is a sign that we are witnessing a new chapter in the bricks vs clicks story. Possibly – even more.
Simply put Showrooming is the practice of checking merchandise in store and than purchasing it online, usually cheaper. Although the practice has been around ever since online stores became competitive in terms of prices (past decade), things started moving a little faster now that smartphones allow in-store price checking. Customers can go to the closest store, try the product they want to purchase and than research prices online. Amazon even has a special app for that.
That’s obviously frustrating for store owners. They setup the shop, pay invoices for rent, pay checks only to find customers passing through the store, checking out the merchandise and than buying it elsewhere. Shoppers, on the other hand, don’t really care if the store makes any money or not. They want to try the product (check!) and than purchasing it at the lowest price (check!).
When it comes to it, companies such as Amazon, Net-A-Porter or eBay, mostly online operations, are of course benefiting and even encouraging the trend. On the other hand traditionally offline retailers frown upon, helplessly, and look for ways to counteract Showrooming.
There is great reason to do so as 69% shoppers look online for better prices and 47% look for free shipping, when checking products in-store.
There are ways for brick and mortar retailers to fight these trends at least in the short run, by:
If you’re a classic retailer you should note that these are only temporary solutions because…
On the long run physical stores will probably become obsolete. A recent study by Paris-based Capgemini shows that:
Retailers tend to focus on the practice of showrooming, but there’s a larger picture of a rapidly changing reality. It’s not this practice they should be focusing on but rather the changing landscape of multichannel shopping. There is nothing mystic about online retail’s rise: it’s just that customers get more products for less money.
Expensive operations as brick and mortar stores, hardly manageable teams that usually harm retailers’ brands and many, many other overheads all add up to a tectonic shift in traditional commerce. Offline-only retailers are a thing of the past. They can ignore the trends, they can fight them but sooner or later they too will be transformed, just like the traditional media juggernaut.
As far as historical records go, commerce has been a traditionally multi-level industry. There were those that produced the goods, the big buyers, the carriers, the retailers, the marketers, all adding up to the costs. When globalization came into effect that became even more so.
Say you wanted to develop and sell a computer. You had those handling raw materials, processing them, the assembly line, the shipping company, transport, distributers, retailers. Not to mention everyone in R&D, accounting and all those other XXI century white collar jobs. Just a glance shows a very, very long line between development and actually delivering the product to its end user.
All along this line, everyone adds costs. In the end the one that pays for these costs is the consumer.
No some companies thought they can do more with customers paying less and such was the case when Dell decided they will be shipping their customized products to those ordering online, when Apple decided they will just go ahead and open their own Flagship store and also let users purchase online, when Amazon built a bridge between writers and book-buyers – they were all just cutting out the middle man.
You think that’s just a timely thing? Here’s a list of startups that are slashing merciless through middle men with the power of ecommerce:
These are rather small startups but if you remember no more than 30 years ago – there was no Apple. 15 years ago – there was no Amazon. 10 years ago we had no Facebook. Personal computing and music, books, communication an media – all industries that had been radically and irreversibly been changed by these rather young companies, driven by the amazing change the Internet is.
We now know retail is changing. With it – our whole society. The outcome is hard to predict but the signs are here. Small and mundane as it might seem, showrooming is one of those signs.
Twitter has recently hired Nathan Hubbard, former Ticketmaster president, to lead the charge on its commerce operations. This move is a part of Twitter’s efforts to pass the $1 billion revenue threshold by 2014. With its current revenues coming almost exclusively from advertising, Twitter figured it can unlock its social commerce potential, a market that is still untapped by most social networks.
While Twitter’s intention is not exactly disruptive or unexpected, it is interesting to have a look at some of the subtle nuances. Hubbard recently declared in an interview that…
“We’re going to go to people who have stuff to sell and help them use Twitter to sell it more effectively. One of the hallmarks of Twitter’s entire approach has been partnering. We’re going to take the same approach with owners of physical and digital goods.”
– Nathan Hubbard
Taking into account Hubbard’s words and the recent developments in social media and eCommerce some things are to be expected:
There is a high chance that Twitter’s commerce efforts might not be all that spectacular, as even the mighty Facebook seems to be running around in circles when it comes to commerce, but I am personally looking forward to see where their efforts take them.
David Ogilvy famously said “The customer is not an idiot. She is your wife.” back when advertising was less about media budgets and more about customer understanding and providing ads that use the type of message your customer actually wants to hear.
Ogilvy was also famous for his approach on advertising. When all others were ignoring research he took an almost religious approach in discovering customer insights so that his ads can deliver information rather than boring or obnoxious advertising.
Years later the world has changed. 2012 meant an increase of 21.1% in global ecommerce. The total ecommerce sales have reached $1 trillion for the first time in history and are still going strong, according to eMarketer.
The revolution is here and both retailers and customers have started looking more careful into online shopping. Yet again we find customers are still not being treated as they should be. In the world of bits and code lines we started expecting users to act like robots. Click here! If this than that! Choose now! Rather mechanic, don’t you think? That can improve and below you will find 3 tips on how to improve your customers’ experience.
Customers still like offline stores better than online stores. Why? Basically they are more accustomed with this type of shopping experience. They’ve done this all their life and feel better about shopping offline. But we, as marketers and retailers, know that “classic retail” is just as artificial as online retail. Of course there are people around doing the same thing, you have the store associate there to help when in need but most of all you have relevant merchandise and relevant stores.
How often had you walked in a supermarket only to buy groceries and had one of the sales people jump in front of you yelling they have a 70 percent discount on a certain brand of TVs? Well you hadn’t – that would be creepy but it does happen all the time in online stores, especially those dealing with a certain not so smart selection of merchandise.
We once had a customer that dealt in fashion. They had huge success online and thought about expanding to other areas. First accessories. We thought – well a nice dress is nothing without a pair of earrings to match it. Then came travel. Mmmm… fashionable people need to … travel? Next came electronics, household appliances which was weird enough for fashion retail but the “piece de resistance” hit the fan when we noticed, standing graciously underneath a beautiful pair of shoes: a jar of pickles. On discount.
Needless to say that is NOT the best way to stay relevant to your customers. It’s hard enough to build a brand on a single industry and unless you can magically profile users like Amazon or Facebook do, you will not be able to jump wagon to another industry.
In a recent study by Accenture focusing on customers’ habits of shopping seamless research showed that users feel they need to be treated the same online, in store and on mobile interfaces.
That is, of course, pretty intuitive. We believe that we have the right to be treated the same no matter where are we shopping. As customers we feel that we should be earning loyalty points for both online and offline.
As retailers and marketers though we find that connecting online and offline operations (usually treated as two separate divisions or even companies – as was the case with Walmart and Walmart.com) is a bit of a hassle. It’s not really easy integrating informational systems to serve the customers as they would like to be served. That shouldn’t stop us as 49% of customers expect seamless treatment across platform when it comes to promotions. Moreover 43% have a unified account when it comes to their favorite brand and expect to use this account to shop faster across channels.
“Webrooming” (the practice of getting information on products online and than purchasing offline) has been growing steadily, with 83% of customers reporting they purchased a product in store after previously researching it online. That’s just a little part of the changes multichannel shopping brings aboard.
How many products does Amazon sell? Probably millions. Chances are you will be seeing a tiny fraction of those whenever you feel like shopping there. Even more – those are the products you are actually interested in. How does the company do that? It keeps tracks of your purchases, visits, ratings, and a couple of other indicators you can read about here. It then matches these options with other’s to return a sorted product list that you are most likely to enjoy and buy. Presto! Simplicity.
The thing is customers are not robots. They have a very short attention span compared to what most online retailers expect them to. They need a simple way of getting to their desired products. A couple of things you can do to improve on these are:
As a conclusion – treat your customers as human beings. They are not purchasing machines. Facts and figures are great tools but make sure you treat your customers as you would want to be treated. Our technology has evolved a lot but our minds have not.
Online retail is the wonder kid of retail – it is young, energetic, it is growing fast yet it is still in its infancy. Based on 2010 estimates online retail amounted for no more than 7% of total retail purchases, as seen below.
The figure may not be exact as it amounts for purchases that happen exclusively online. Users tend to mix retail channels in their quest for a better shopping experience. They might know the brick-and-mortar store brand and order online because it is more convenient. They might also discover the online store, find the product best suited and than “feel” it in the physical store.
Multichannel tracking has not changed that much since the days consumers would receive coupons in magazines and advertisers would track these coupons to get a better view on what’s efficient and what is not in their marketing efforts.
First and foremost – what is Multichannel Shopping? As you probably have noticed or done so yourself, shoppers tend to use multiple ways of combining online and offline activities. Here are the most important:
As retailers increasingly look for new ways of tracking consumers and increasing sales they use a combination of old(er) and new(er) strategies, such as:
What is your take on multichannel shopping?