AACS is pleased to advise that Michael Baker [see story below] will be a speaker at this years Convenience Leaders Summit in November.
Michael Baker
September 12, 2012
The Age
ANALYSIS
The practice of ‘showrooming’ – where shoppers touch and feel merchandise in stores and buy it online if it’s cheaper – is a growing phenomenon.
ANALYSIS
An unfortunate side effect of retail’s technology revolution has been the spectacular rise of junk research. You see examples of this every day in the trade and business media. It usually takes the form of a self-serving “industry study” by some tech company or consulting firm that purports to show how this or that changing consumer practice or new technology is about to devour your industry without even spitting out the bones.
According to the study, ‘showroomers’ are more likely to be younger, female lower-income and frequent online purchasers.
This is a nervy enough time as it is for retailers with physical stores. Consumer demand is waxing and waning, and capital budgets are needing to be diverted from opening new stores to remodelling existing ones and building up e-commerce.
One consumer practice that has made store operators particularly jumpy is so-called “showrooming”, where shoppers use the physical store to touch and feel merchandise but then switch on their smartphones or tablets to compare prices with other retailers, sometimes resulting in their making the transaction somewhere else.
Showrooming is thought to be a growing phenomenon as smartphone and tablet ownership rises. Smartphone penetration alone is more than 50 per cent of the Australian population according to some sources.
How prevalent is showrooming though? Is it a big deal or a beat-up? Unfortunately, reliable data is not available -at least not yet – leaving the kind of information vacuum that the practitioners of junk research just love to exploit.
Enter, triumphantly, US consultancy GroupM Next, with its new study entitled Showrooming and the Price of Keeping Shoppers In-Store. This research consisted of a survey of 1000 people who were shown a list of 10 products and asked hypothetically how much of a discount would be required from another retailer to make them leave a store and buy elsewhere.
With one exception – headphones – we aren’t told what the products are and how expensive, but no matter, the results are predictably apocalyptic: 45 per cent of customers said they’d leave the store for a piffling 2.5 per cent discount, 60 per cent would walk for as little as 5 per cent and by the time you get to a 20 per cent discount it’s a mass exodus – only 13 per cent of respondents said they’d stay.
According to the study, ‘showroomers’ are more likely to be younger, female lower-income and frequent online purchasers. Less likely showroomers are older and male.
The problems with this kind of research are almost too numerous to mention – what people “would” do hypothetically is often not what they will do in practice; we don’t know how many of the respondents actually own smartphones; we don’t know what the products were; we don’t know how behaviour would change if the product mix were changed, and so on.
This is not to say that showrooming shouldn’t be taken seriously. It’s effect is inherently deflationary since it forces retailers to harmonise the prices of merchandise in stores with the prices of the same merchandise sold online.
Showrooming also forces retailers to re-think both their merchandise mix and their in-store service models to: a) offer merchandise in the store that is unique (e.g. through private-label brands), and b) look at ways of closing the sale in the store itself (for example through more attentive sales assistants).
Over time, the intricacies of showrooming will emerge from the darkness because we will have research based on observed human behaviour in a variety of settings.
Meanwhile, beware the junk research, which is dumped in our email inboxes every day like concrete at a building site. Consider the source of the research, the commercial motivations for conducting it, and the transparency of the methodology. Unfortunately, much of it won’t pass the smell test.
Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com.
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