According to a recent IBM report, retailers should no longer feel threatened by the practice of retail showrooming. Time to pop the champagne, right? Retail showrooming is a known margin killer and according to the IBM report, it now occurs at so such low levels, as to not constitute a measurable threat. So rest easy, brick and mortar retailers, you’ve dodged calamity. No more sleepless nights worrying about shrinking margins, plummeting sales, and unsold inventory…all is well.
Or is it?
While I agree with the IBM report that retail showrooming is dead, unfortunately, that’s not the story. The IBM report completely misses the elephant in the room…while retail showrooming is dead, virtual showrooming is exploding (virtual showrooming is the practice of comparison shopping and purchasing online without ever visiting a store).
Data from this past year bears this out. While internet sales dollars were up 40% this past holiday season, retail sales were generally flat to down, and retail foot traffic was down an alarming 15%. Certainly, some of that foot traffic decline can be attributed to 6 fewer selling days (and some inclement weather) but the majority of that decline is from virtual showrooming.
What’s happening? Consumers discovered that comparison price shopping on a mobile device stinks. While mobile devices are great for updating your Instagram and Twitter feeds, they are terrible for comparison price shopping. Screens are just too small and don’t allow the flexibility and movement of full screen computers. It’s just too difficult, so people don’t do it. But that’s not a cause for celebration. Those same consumers have just switched to a more efficient medium.
A report from ChannelAdvisors.com bears this out. It found that 75% of online holiday purchases were made using full screen devices. Want to bet how many of those consumers were responsible for that 15% drop in retail foot traffic? As technology and apps get faster and more powerful, does anyone think that this trend won’t continue? Hence, the new challenge. How to stem the rise in virtual showrooming by the price-conscious, tech-savvy consumer.
Traditional solutions like omni-channel retailing, in-store experience, internet price matching, and loyalty programs will only go so far (see: recent Best Buy earnings report). The key to combating virtual showrooming is to eliminate the opportunity for showrooming to occur in the first place. That means addressing inventory assortment.
Showrooming can really only occur when what’s available in the store is also available online. Therefore, preventing retail or virtual showrooming, starts with an assortment plan that recognizes showrooming risk before inventory is ever purchased. Most of us wouldn’t extent credit to a customer without checking their credit risk first. So why would a forward-thinking retailer buy inventory without first checking out the vendor’s showrooming risk?
Technology now exists to measure showrooming risk comprehensively and analytically. The retailers that will survive and prosper in this new environment will be those that are as savvy with technology-enabled assortment planning as the consumers are with technology-enabled comparison shopping. But do traditional brick and mortar retailers have the capability to adopt new thinking? Do they even understand the problem? Or, will they continue to bury their heads in the sand and celebrate “the death of retail showrooming?”
David Coleman is the CEO and Founder of Brandoogle (brandoogle.com). Brandoogle works with retailers and brands to combat showrooming with a proprietary suite of software and services. He can be reached via e-mail at firstname.lastname@example.org.