Showrooming

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Electronic items are among those frequently examined by customers in a retail store prior to their online purchase.

Showrooming is the practice of examining merchandise in a traditional brick and mortar retail store or other offline setting, and then buying it online, sometimes at a lower price. Showrooming enables shoppers to make more informed purchases. Online stores often offer lower prices than their brick and mortar counterparts because they do not have the same overhead cost.[1]

Prevalence[edit]

A 2012 comScore study found 35% of U.S. consumers reported showrooming and of those, half were between 25 and 34 years old.[2] A 2013 survey polled 750 U.S. consumers, 73% of whom[3] reported having showroomed in the previous six months.

The importance of showrooming for shoppers[edit]

Showrooming exists because shoppers get value from seeing and feeling products in person before buying them. Showrooming enables consumers to make more informed purchases. Here are some of the benefits to consumers: greater satisfaction with purchases, increased product usage and reduced waste, fewer returns and hassles, and monetary savings.

Benefits for product manufacturers[edit]

Showrooming benefits product manufacturers that sell their products directly to consumers online in addition to selling their products in brick and mortar retail stores. Retail stores typically have significant overhead costs, including rent, utilities, and labor. To cover the costs of operating retail stores, retailers mark up the price of products, sometimes in excess of 100% (markups vary depending on the type of retail establishment). The result is reduced profit for the product manufacturer (than what would have been realized by selling direct to consumers), who may in some cases set a strategy to break even on sales in retail stores as a way to boost sales and brand recognition. Also, these higher costs can be passed on the the shopper, who then ends up paying more to cover expenses and margins of the product manufacturer and the retailer.

When shoppers engage in showrooming, and then purchase goods directly through a product manufacturer's online store, product manufacturers make a greater margin on each sale. By going direct, manufacturers have been able to reduce prices for shoppers, saving shoppers money.

The changing retail landscape[edit]

The retail landscape is changing dramatically. While e-commerce sales still make up just 6.2% of total retail sales in the US, e-commerce is growing significantly faster than other retail and the trend is expected to continue. US retail e-commerce sales in the first quarter of 2014 grew by 15.0% compared to the same quarter in 2013, whereas all other retail grew 1.7%

E-commerce retail sales are forecast to grow by an average of 13.8% annually through 2017 growing to $442 billion in 2017.

Effects on retailers[edit]

Showrooming can be costly to retailers, not only in terms of the loss of the sale, but also due to damage caused to the store's floor samples of a product through constant examination from consumers.

Showrooming[4] was said to be behind the collapse of UK photography chain Jessops,[5] and Target’s decision to discontinue carrying the Amazon Kindle.[1]

Efforts to combat showrooming by retailers[edit]

Many retailers have tried to compete with showroomers by slashing their own prices. Independent businesses, however, are advised to counter showrooming by adding value via included services and other tactics, such as making information and reviews more readily available to customers so that they might not choose to seek it out online.[6]

Some major retailers, such as Target, are attempting to battle showrooming by selling products exclusive to their stores. Walmart is allowing customers to avoid the shipping charges of online purchases by picking up the items in the stores. The same practice is expanding to European countries.

Some specialty fashion stores in the U.S. and Australia have introduced a "fitting fee" for browsing, which is refunded in full if the customer makes a purchase.[5]

Best Buy has guaranteed to match the online price of goods listed on Amazon.com, and in April 2013 announced it would begin to lease out space to manufacturers such as Samsung, so customers can view working products and then purchase them at the MSRP. [7]

References[edit]

  1. ^ a b "Is 'showrooming' behind Target move to drop Kindle?". Content.usatoday.com. 2012-05-03. Retrieved 2012-10-22. 
  2. ^ Kotler, Philip (2012). Principles of Marketing (15th Edition). Prentice Hall. p. 411. ISBN 0133084043. 
  3. ^ [1]
  4. ^ Statistics about Showrooming in the Retail Environment. Statista. April 4, 2013. Retrieved April 5, 2013.
  5. ^ a b Campbell, Alex (21 April 2013). "The peril of 'showrooming'". BBC News. Retrieved 22 April 2013. 
  6. ^ Woods, Casey (2012-11-26). "Seven Ways Businesses and Communities Can Fight "Showrooming"". Retrieved 2012-11-26. 
  7. ^ "Best Buy turns the tables on ‘showrooming’". 2013-04-04. Retrieved 2014-01-28.