Target Follows Best Buy to Embrace Showrooming
Over the past couple of years the term showrooming has become pretty much ubiquitous as the phenomenon developed and naturally expanded with the incredible growth and presence of the Internet. This phenomenon was tremendously fostered through the increased sophistication of search capabilities on the web and the growing abundance and development of mobile devices.
Showrooming of course is at its simplest, the act of visiting a store to physically check out products while comparing prices and features online. The shopper’s assumption here generally, is that one can find more attractive prices online while being reassured by a product’s key physical attributes and qualities in person, at a store location.
Over the past few years Best Buy and Target have been easily among the most outspoken retailers to voice concerns over the phenomenon of showrooming and have loudly announced searches for solutions for what they see as a key threat to their business and perhaps survival.
Many of their efforts have revolved around negotiations with manufacturers to create ‘exclusives’, products which have a differentiation which would be offered only by said retailer. Often these differentiations seemed minor in nature and hardened back decades when department stores and even some ‘discount’ retailers would avoid price comparisons by pointing to the slightest difference in model number, which reflected a minor difference in features.
Early last year, Target issued a letter to suppliers requesting a joint effort towards creating exclusives in products just to avoid exact comparisons by shoppers (showroomers). Best Buy’s forte has often revolved around celebrity or major manufacturer tie-ins for its exclusives. When a CD could be offered in conjunction with a concert tour or memorabilia associated with the artist, Best Buy set up ads on national media. These were often very successful and brought in attractive margins over similar merchandise without these features. Unfortunately CDs are no longer the draw nor profit purveyor they once were.
In its own right, Walmart has indirectly come up with solutions to showrooming through seemingly identifying methods of attracting cash paying customers to its stores as a part of the ordering process from its website. As increasing segments of consumers do not have access to lines of credit and may also have difficulties with debit cards and related fees, accepting cash at the store level offers a feature with which websites can’t easily compete. Plus it gets shoppers into a store with lots of impulse values.
As to Best Buy and Target, earlier this year Best Buy CEO, Hubert Joly, announced that the consumer electronics retailer would embrace showrooming and aggressively price match all competition. In the past Best Buy stores would price match even local competition with a hodgepodge of limitations. This served to turn off many shoppers and undoubtedly contributed to the company’s weakened financial performance.
In some instances shoppers were told to visit only the nearest store of a national chain and if it was confirmed that the store had inventory on the specific product, the shopper was asked to return to the Best Buy location to get the same price.
Other times, a local Best Buy associate could read on the Internet that the nearest say, Circuit City location was temporarily out of stock on a product and thus there could be no match. Never mind that another nearby Circuit City store had the product and it was nearer to the customer’s home or office.
Now Target is taking a stance with which it is proactively embracing showrooming. The retailer has indicated that it will now fully price match against all competitors including Amazon. Target executives now state that they see showrooming as being laden with opportunities for retailers. They simply indicate that retailers must play to their strengths by offering a strong combination of an attractive, functional, efficient physical store presence combined with a commanding, enhanced website.
With both Target and Best Buy welcoming shoppers to visit the likes of Amazon.com from the comfort of their stores, it seems proof positive that they feel they can profit through likely lower margins, by capitalizing on a higher percentage store visitors. Of course once in their stores shoppers are open to all sorts of unanticipated well-priced temptations. They may also decide to give into customer loyalty programs. Then there is also Target’s five percent discount for users of its private credit card.
In reality showrooming has been around in kind, long before the Internet. Especially on big ticket items, shoppers have often preceded the purchase with detailed research. They generally approached the retailer with all kinds of information including features and price comparisons. If they were unhappy with an offered or stated price, they generally wouldn’t hesitate to inform a salesperson of their findings. This has long been the model for buying a new car. Only now the web has made price and feature comparisons more timely and immediate in nature.
Showrooming never could be ignored and isn’t going away. It only keeps getting enhanced. Finally Target and Best Buy have come to the, ‘if you can’t beat them, stop hiding’, conclusion.
Welcome to reality in the 21st century. After all when customers are in a store showrooming, they are looking to buy something. Brick and mortar retailers just need to get them to overcome a barrier that is generally tied up in price. They already have the advantage of immediate gratification once the sale is made.