Showrooming isn’t technically a crime, but if you ask many of my clients they think it should be.
Each year, showrooming costs retailers tens of millions in lost profits. Showrooming is when someone purchases a product online after researching it in a brick and mortar store. Last year, $42.3b was spent online and a large percentage of those sales were from showrooming. While exact numbers are difficult to determine, it’s clear that brick and mortar retailers are facing a critical challenge. Everybody showrooms. Who among us hasn’t seen an item in a store, checked prices, purchased it online, and then gleefully bragged about our savings to a friend?
Unfortunately, my retail clients don’t share that same joy.
By some estimates, as much as 48% of visitors to brick and mortar retailers are showrooming them…and doing it in plain sight.
Showroomers aren’t hard to find. They are usually the person scanning items with their smartphone, punching a few keys, and then walking straight out the door—usually with a smile on their face. The problem can be even worse for retailers of high end, highly technical, or complex products. Their staff is swamped answering questions on product features and functionality, yet rarely closes a sale.
Well-established brands with high-value, high-margin items are the most lucrative for online flea marketeers to exploit. Margins can be shaved with lower, overhead structure and customers can be reached easily through the Internet.
Retailers can be at fault too. “We Match Internet Prices!!!” is not a leadership strategy, a marketing strategy, or even a pricing strategy. It’s a retailer’s suicide note.
Yet despite this looming menace, most retailers don’t know where to begin. Most retailers ignore showrooming altogether. They tend to spend their time and money fighting tangible threats like shoplifting. Yet, shoplifting only occurs in a fraction of 1% of all store visitors. Showrooming threatens a retailer’s existence.
What is a retailer supposed to do?
The answer is to fight back with a comprehensive battle plan…a plan that appreciates the changing retail landscape. Some ideas:
1. Understand which high-value, high-margin items are likely candidates for showrooming.
2. Learn how the product assortment and pricing stacks up against Internet vendors. Showrooming only occurs when a product is available in the store AND on the web. If it’s not on the web, the retailer is not going to get showroomed.
3. Track the pricing and distribution of items online. Identify potential challenges. Identify the sources of any showrooming.
4. Have frank discussions with branded goods vendors. Remind them that retailers still make up the lion’s share of most product manufacturers sales and profits and if they wish to be part of the assortment tomorrow, they must clean up their Internet presence today.
5. Monitor over time and be vigilant. A clean product line can be showroomed in a matter of weeks.
6. Don’t be afraid to take action. Whether you pull a product line, pursue a legal strategy, or simply host a frank “sit down” with a supplier, don’t be afraid to be aggressive.
Unfortunately, there is no “silver bullet” to fix the showrooming problem. It’s going to be a complex and labor intensive fight. But it can be won. Retailers and their high-end brands still have a lot to offer that the Internet does not. The key for retailers is recognize those differences, understand that showrooming is a problem, and adapt their business models to aggressively compete in this changing landscape.
David Coleman is the founder of Brandoogle, an online brand protection company and has nearly two decades of supply chain and brand management experience serving Fortune 100 and Fortune 500 clients.