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.

Twitter Starts Developing Commerce Operations. Hires Ticketmaster CEO to Lead Commerce Efforts

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.

Twitter's new Head of Commerce - Nathan Hubbard
Twitter’s new Head of Commerce – Nathan Hubbard

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:

  1. It’s really important to note that Twitter’s efforts seem to be going into C2C territory, as well as the traditional approach into B2C. Twitter’s users may be empowered to exchange and trade stuff on the social network, an activity that is not that uncommon on its main competitor platform, Facebook. That may mean that Twitter’s commerce innovation will be to help transform its social network by adding a C2C commerce layer, not unlike Ebay’s platform. It does have the users, it might just as well let them trade.
  2. There seems to be a great focus on digital goods, as they may work better with the digital market Twitter is building. Some of Facebook’s best commerce results came from digital content, such as apps, especially Mobile App Install Ads. The Install Ads have helped Facebook increase its share of mobile – related revenue to 41% of total. But digital products is a far larger market than apps. It goes beyond to include concert tickets, airline reservations, hotel reservations, digital books and many others.
  3. You might have noticed that Twitter left the “e” out of its “eCommerce” operations as the company has a Commerce target. Both online and offline. A multichannel approach, if you will. As the lines between traditional and online retail have become almost invisible in the past years, Twitter seems to be looking into an integrated commerce approach, tracking and targeting the potential consumer via brick and mortar stores, as well as online. To help deliver metrics on such efforts, the company recently paid $90 million for Bluefin, a social and TV advertising metrics company.

 

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.

The Customer is not a Robot. She is Your Wife. 3 Tips on Improving Customer Experience.

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.

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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.

World's biggest in terms of ecommerce spending.
World’s biggest in terms of ecommerce spending.

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.

1. Be relevant

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.

2. Be more than Online, Offline and Mobile. Be Connected Across Channels.

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.

Integration of  the Big Three (Product, Promotion, and Price) across channels.
Integration of the Big Three (Product, Promotion, and Price) across channels.

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.

3. Make it Simple

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:

  • track users behavior and predict their purchase intentions
  • improve search according to semantic searches (human talk – ex. “looking for a blue, casual shirt” might return all shirts that are blue, and casual)
  • hide any products that are not in user’s interest area.

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.

Bridging the gap in multichannel shopping

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.

Evolution of online rtail share
Evolution of online retail share

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.

What is Multichannel Shopping?

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:

  1. Shopping across multiple channels (brick-and-mortar stores, online shops, mobile apps, phone order etc.). Consumers will try to use the best channel available at the time. Say you are a avid online shopper but this evening your brother celebrates his anniversary and you forgot to buy him a present. You will rush over to the closest store and buy something from there, after you have searched for that store and the gift online.
  2. Using more channels to purchase goods from a single retailer. Users that are accustomed to a certain brand will try to buy as often as possible from that particular brand. They will mix offline and online purchases, depending on the specific occasion, while staying loyal that brand.
  3. Using multiple channels to complete a purchase. Users will use multiple channels sometimes, to get the best deal / the easiest way to get the goods. They might browse the online store, order the product on the phone and purchase / pay for it in the brick and mortar store.

How can we track Multichannel Shoppers?

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:

  1. Multichannel loyalty programs – this programs are usually extended CRM programs, using identifiers such as member cards, phone numbers, unique ID’s or others. Consumers are encouraged through loyalty points incentives to use their ID’s on the different channels
  2. Multichannel consumer life cycle – tracking the consumer through different channels by combining online and offline purchase steps (Ex.:buy online, pay offline, support on the phone)
  3. Track users through wi-fi and mobile use – a rather cutting edge yet extremely promising strategy of trading free on-location internet (everybody wants some), combining it with personal online data (such as Facebook user accounts) and seeking trends in collected data, in order to increase sales and understand the consumer life-cycle better.

What is your take on multichannel shopping?