Showrooming and The Future of Retail

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.

What is Showrooming?

showroomingSimply 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.

Showrooming stats
Showrooming stats

There are ways for brick and mortar retailers to fight these trends at least in the short run, by:

  • offering to price match their online competitors
  • increase customer retention by creating loyalty programs
  • develop online operations to increase market reach and decrease product costs, therefore harnessing the Showroomin trend

If you’re a classic retailer you should note that these are only temporary solutions because…

Showrooming will eventually turn stores into showrooms

On the long run physical stores will probably become obsolete. A recent study by Paris-based Capgemini shows that:

  • most offline stores are expected to become obsolete in their present form, and will be replaced by actual showrooms by 2020
  • when that happens, shops will actually sell more, as 56% of digital-enabled shoppers spend more when they first research the product they want online
  • 73% of shoppers expect online prices to be lower

There will be no “brick and mortar”-only retailers

The Boyer, Hensinger & Kleppinger General store, now a part of history.
The Boyer, Hensinger & Kleppinger General store, now a part of history.

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.

Ecommerce cuts out the middle men

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.

Startups are slashing through middle men

Outstanding design and materials to Warby Parker eyewear
Outstanding design and materials to Warby Parker eyewear

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:

  1. Founders of Warby Parker showed they can slash prices on premium eyewear by cutting out designers, brands, wholesalers and retailers. From just 1% online buy rate for glasses they now expect the industry to deliver almost 15% in the next year. They managed to do that by letting customers receive home 5 pairs, for 5 days, so people can try them on, ask their friends what they think about them and than return 4 back without any charge.
  2. Seasonal collections? Screw that, Crane & Canopy releases new high quality duvets each week based on Pinterest and social media trends. They do that by connecting premium factories to end buyers. They cut out the wholesalers, retailers and premium designers.
  3. Similarly, Bonobos started when Stanford B-School students Brian Spaly and Andy Dunn decided they want to start a new business, met with a taylor and figured they can make affordable fitted clothing for men. Soon enough they were raising $16.5 million in venture capital and the business really took off.
Bonobos founders Brian Spaly and Andy Dunn
Bonobos founders Brian Spaly and Andy Dunn

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.