Question

Many shoppers walk into brick-and-mortar retail stores, see products that interest them, and conduct research on their smart-phones. Many of these shoppers ultimately make their purchases online and they may make their purchases from the Web site of the store they are in, or from another online vendor. This comparison process is called showrooming.

Showrooming occurs when shoppers visit a store to examine a product in person but then proceed to buy it from a rival online, frequently at a lower price. This process is presenting a worsening problem for brick-and-mortar retailers, including Target, Best Buy, Walmart, Barnes & Noble, and many others. At the same time, showrooming benefits Amazon, eBay, and other online retailers.

For example, Amazon’s Price Check app has made showrooming even more widespread. Amazon awards customers with an additional 5 percent discount (up to $5) on up to three qualifying products if they use this app to check the price of those products while shopping in a physical retail store. Eligible categories of products include electronics, toys, music, sporting goods, and DVDs. Shoppers can utilize this app to price-check in four ways: by scanning a bar code, by snapping a photo of the product, by pronouncing the product’s name, or by typing in a search query.

Online-only retailers have two significant advantages over traditional retailers. First, their labor costs are significantly lower. Second, at least for the time being, they do not collect sales tax in most states, which makes them very appealing to their customers. Going further, sites such as Amazon are based on an entirely different business model than are traditional retailers. That is, Amazon can sell products so cheaply because it uses its other pro table business units—such as cloud data storage and the fees it charges merchants to sell on its Web site—to subsidize the rest of its businesses.

Traditional retailers that do not use this model are unable to match Amazon’s low prices, which puts them at a fundamental disadvantage. In addition, consumer preferences in general are moving to online venues. Traditional retailers like Target, Best Buy, and Walmart are playing catch-up in online retailing, which is becoming an increasingly important avenue for sales. It is critical for traditional retailers to become more attractive to their customers, so they are fighting back against the online retailing giants.

Target’s Attempt. In fall 2011, Target (www.target.com) relaunched and upgraded its Web site, which had been operated by Amazon for the last decade. During that time, the site had crashed several times, most notably when shoppers rushed to buy a special line of items made by the Italian fashion house Missoni.

Target also asked its suppliers for help in limiting showrooming. In January 2012, Target sent a letter to its vendors, suggesting that they create special products for Target so that they could set themselves apart from their competitors and shield them- selves from the price comparisons that have become so easy for shoppers to perform on their computers and smartphones. When this option is not possible, Target asked its suppliers to help it match their rivals’ prices. Vendors are likely to try to meet Target’s requests because Target is a very large and prominent retail chain.

Maurices’s Attempt. Other traditional retailers are using geofencing. A geofence is a virtual perimeter for a real-world, physical geographic area. For example, Maurices (www.maurices.com), the women’s clothing chain, sends promotions to the smartphones of people who come within a few hundred yards of its stores. Only consumers who opt in to the service are sent messages about in-store sales.

Meijer’s Attempt. Meijer (www.meijer.com), a chain of supermarkets, is adopting a different approach. The chain is using sensors in its stores to offer customized information and virtual coupons via smartphone. In addition, it provides a special service for customers who prepare shopping lists online. These shoppers can open up the retailer’s app inside the store, and the app will reorder their list based on their location in the store, thus speeding up the shopping process. The approaches of Maurices and Meijer are of questionable value. After all, not everyone has a smartphone. Perhaps Best Buy (www.bestbuy.com) has a better plan to compete with online retailers.

Best Buy’s Attempt. Just a few years ago, Best Buy was regarded as one of the nest retailers in the world. However, the firm’s profits declined by 91 percent between 2011 and 2012, and its share price fell dramatically. Despite these depressing financials, Best Buy is still the largest personal computer retailer, the largest independent phone retailer, and the largest camera dealer in the world. It also sells more tablets than any other retailer.

Best Buy decided to focus on the strengths of physical retail that online companies cannot match. For example, showrooming is a threat, but it also exposes a major limitation of online commerce: People want to try before they buy, and they cannot do that on a Web site. Even more importantly, Best Buy has a vast logistics network that delivers products quickly and reliably to 1,400 stores across the country. Order a product online from Best Buy, and you can pick it up the same day from one of its physical stores.

In essence, Best Buy is combining its physical storefronts and digital infrastructure into a single, unified organic package. For instance, Best Buy is embracing the showrooming trend with a pilot project that it launched in 50 stores. When a customer comes in to test out, say, high-end cameras, a sales rep with a tablet meets him or her to compare specifications on the various models. Meanwhile, specially trained reps try to provide the kind of service that customers cannot easily find online. For example, if the customer finds a camera he or she likes, the rep can pull up a list of comparison sites to locate the lowest price. (Best Buy is trying to match competitors’ prices whenever possible. This process has become easier as states now require Amazon to charge sales tax on its transactions.) Going further, if the customer wants a camera that is not in stock, the rep can help him or her place an order through BestBuy.com. The customer then has a choice of delivery methods— same-day in- store pickup or home delivery. As Best Buy’s CEO explained, “What beats Amazon brime and free shipping? It’s something that’s in stock, near me, and right now. And if you can add a knowledgeable rep and a price match, you are golden.”

It remains to be seen whether low price points at online retailers will spell ruin for their more traditional competitors. Traditional retailers will have to offer customers a truly exceptional shopping and buying experience to be able to compete in the marketplace. It may be that Best Buy has the best idea: integrate its physical stores with the process of showrooming.

Sources: Compiled from M. Copeland, “Death by a Billion Clicks,” Wired, December, 2012; B. Tuttle, “Put Down the Mouse,” Time, November 26, 2012; M. Townsend, S. Maheshwari, and C. Timberlake, “The War Over Christmas,” Bloomberg BusinessWeek, November 5–11, 2012; D. Mattoli and M. Bustillo, “Can Texting Save Stores?” The Wall Street Journal, May 9, 2012; N. Potter, “‘Showrooming’: People Shopping in Stores, Then Researching by Cell Phone, Says Pew Survey,” ABC News, January 31, 2012; A. Zimmerman, “Showdown Over ‘Showrooms’,” The Wall Street Journal, January 23, 2012; J. Milliot, “The Amazon Price Check App and the Battle Over ‘Showrooming’,” Publishers Weekly, December 9, 2011; T. Novellino, “The Amazon App Attack,” Portfolio.com, December 8, 2011; E. Straub, “Browse at a Book- store, Buy at Amazon: The Evil of Showrooming,” Time, December 8, 2011; A. Chang, “Retail Groups Lash Out After Amazon Announces Price Check App Promotion,” The Los Angeles Times, December 7, 2011; A. Chang, “Amazon Giving Shoppers Up to $15 for Using Its Price Check App,” The Los Angeles Times, December 6, 2011; www.target.com, www.pewresearch.org, www.bestbuy.com, www.amazon.com, accessed February 28, 2013.

Questions (minimum 500 words)

1. Do you practice showrooming? If not, why not? If so, why? Do you showroom only to compare prices? List other reasons why shoppers might practice showrooming.

2. What other strategies could Target and other brick-and-mortar retailers implement to combat showrooming? Provide examples of IT solutions and non-IT solutions that were not discussed in this case.

Answer 1

Answer)

1. Yes,I have done showrooming and I practice it whenever possible,major reason for doing so is to compare prices,fact is when one goes for shopping they want to feel the product,touch it and see if it is good ,this is not possible in online shopping but in online shopping it is possible to get discount ,so as a customer I check to see if I am getting better price.Do I showroom for only prices,I would say not just prices but that is my major reason but I do check for reviews as well.Apart from above reason of checking reviews ,shoppers might practice showrooming to see if a similar product at a cheaper price is available or if a better version of this product is available,another reason for showrooming is to check if product has good post sales customer services,this is particularly found in cases of electronics such as smartphones or laptops where you want to assess whether customer service will be good or bad.
2. First,we will look at non -IT solutions,case and point 1 of this answer does talk about expeience of feeling the product but what can enhance retail sales is enhanced in store experience such as fragrance marketing or sound marketing or in house on the spot promotions such as every purchaser will get a scratch card with some assured gift,another aspect of shopping is customer service which is often ignored by retailers,a retailer can promise much better coordination for post sales service,finally another solution is to practice membership where customers pay fees upfront and enjoy member only benefits and get access to discounts.When we talk about IT solutions we start with social media where retailers can form a bond with their customers through content showcasing about their customer service and all those things which online retailers cannot give.Second IT solution is about creating its own website where it can provide non-branded unique products at cheaper cost ,these products will only be available online through website and in case customer wants to go for non branded cheaper products,they can always go for it.

In conclusion,showrooming is not unethical,solution for retailers lies in adopting new strategies and being flexible,playing to their strengths and being more proactive than reactive.

Answer is complete.Thank you!