Brick and mortar stores are facing increasing competition from online stores. One of the biggest challenges: customers are testing or trying on the merchandise in store and buying it online, cheaper. With increasing pressure from ecommerce, traditional retailers need to know what is showrooming and how they can benefit from it.
What is Showrooming?
Simply put Showrooming is the practice of checking merchandise in store and purchasing it online, usually cheaper. Although the practice has been around ever since online stores became competitive in terms of prices, things started moving a faster and faster. In 2020, the trend became even more prevalent, with store closures and more effective ecommerce stores. Customers can go to the closest store, try the product they want to purchase and then research prices online.
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 then 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 then purchase 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:
- 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 Showrooming 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, in their current format, will probably become obsolete. Here’s a few things that might lead to that:
- newer consumers value experiences and much more than they value the goods and the prices;
- the store assistant job will change bringing in more of a store-to online format, with the rise of live commerce and live shopping;
- stores will transform their function from sales to display-and-engage, driving brand awareness and loyalty;
- online stores will open physical presences and will start leveraging their assets, like more effective use of technology and supply chains;
- consumerism will be replaced by a hybrid form of community driven commerce, where goods are re-wearable, sustainable and help local economies.
There will be no “brick and mortar”-only retailers
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. Brick and mortar 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 globalisation 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
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:
- 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.
- 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.
- 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.
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 and 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.
Dell is the only company in this top to have a negative growth. The decrease in sales is a direct result of global PC sales contraction in 2011. If your company is not named Apple and your business has something to do with PC’s, than 2011 was probably one of the worst years for you. In fact Dell’s PC’s shipments 
Walmart is big. Really big. It operates more than 10.000 retail units in 27 countries. It’s net sales in 2012 increased 5.9% to 443.9 billion dollars. Big as it might be, Walmart did miss the start and that’s one of the reasons it’s “only” no.4 on our list. But worry not – the company expands its operations online as aggressively as it does with its brick and mortar stores and soon it will be fighting for the top position.
As I am writing this post Exxon surpassed Apple to become, once again, the largest company in the world. However, Apple is still valued at $413 billion and it is still the coolest thing in technology. The company started its online sales operations in in november 1997, an year after acquiring NeXT Computers and bringing back Steve Jobs.
The first company in this list to cross the $10 billion in online sales threshold is Staples, the largest office supply chain in the world. Staples has more than 2000 stores in 26 countries but it plans to slash its brick and mortar space by 15% and focus on online sales.
Yes, I know it may come as a shock but Amazon is, indeed, the largest online retailer in the world. It leads the online retailers’ top by a very long margin and it will continue to do so for a very long time, if we are to look at its continuous growth, its innovative practices and its aggressive expansion.