Showrooming: The Start of the Dark Ages?

Recently, a new dreaded word has entered the traditional retailer’s vocabulary, and that word is “Showrooming”.  It is a word used to describe a phenomenon where shoppers come into a brick and mortar store to see a product in person, and even try it out, but make the purchase online, often for a lower price. Again, this is just another instance of where traditional retailers feel that their investments are being used by their online rivals, and large retailers such as Target and Walmart has urged their suppliers to create special products that is only available to their respective stores.

yup, something special, like guns

In the United States, online only accounts for about 8 percent of total retail purchase by customers, but it is growing very quickly. While everyone is trying hard to gain traction with their online arm of business, large retailers such as the aforementioned Target and Walmart only get about 1-2% of their business online, quite far from the national standard, and highlights their awkwardness with the medium. 

 about the right level of awkward

While there are many players in online commerce, one giant stands out from the rest. Amazon.com is quite possibly the strongest online retailer at the moment, and they try different tactics to aggressively chip away the advantages that traditional brick and mortar retailers have.

In fact, Amazon has developed an application that allows users to take a picture of a product at a brick and mortar store, and find out how much Amazon is selling it for. To add insult to injury, Amazon also had a promotion that gives an extra 5 percent discount to users who would use the application at a brick and mortar store, but make the purchase online with Amazon. 

Looking at what marketing and online commerce literature tells us, especially in the consumer behavior discourse, it is quite understandable why something like this would happen. One of the main barriers to online shopping is the presence of risk for consumers. With the Internet being a relatively new channel of commerce, there are a few impending unknowns that a regular shopper has to face. 

Going back to traditional shopping behavior, Jacoby and Kaplan (1972) have identified five components of risk, which are economic, performance, physical, psychological and social. Going to the online environment, research has shown that while most shoppers acknowledge the benefits of online purchases (Mariani and Zappala 2006), most cannot get over the financial risk relating to the use of credit cards on the Internet (Bhatnagar, Misra and Rao 2000).

 because some risks are just not worth it

In the current environment, there has been ways to alleviate the financial risk of an online purchase, whether it is the actual security improvement of most sites, or the availability of third party entities that act as a buffer between a buyer and a seller, such as Paypal. One factor that links directly to product is the risk of the product not performing to expectations or product performance risk (Dall’Olmo Riley, Scarpi and Manaresi 2006).

This risk is exaggerated in an online environment, mostly due to the inability to physically touch or try the product (Forsythe and Shi 2003). This limitation means that consumers have to rely on other signals to be persuaded to shop, such as the reputation of the brand, review from other users or prior experience with similar products in an offline setting.

Showrooming as a phenomenon is actually a peek towards the future, where people try to overcome one limitation of a platform by utilizing another platform. The question is how retailers can combat this, and even if consumers want to make purchases online, they do it at the traditional retailers store. There are no easy answers for this conundrum, but traditional retailers have to realize that it is not something that can be stopped half-heartedly.

half hearted is going to a Helloween party like this

Getting products that are unique to your store is a start, but more needs to be done, from actually trying to change the business model, creating a new way of doing retail, or providing an experience for shoppers that cannot be replicated online. Traditional retailers might not have the answers now, but in the end, only those who can eventually answer this question will survive. 

Reference:

Bhatnagar, A., S., Misra, and Rao, H.R. 2000. On Risk, Convenience, and Internet Shopping Behavior. Communications of the ACM 43(11): 98-105. Emerald. http://emerald.com (accessed March 10, 2012).

Forsythe, S.M. and Shi, B. 2003. Consumer patronage and risk perceptions in Internet shopping. Journal of Business Research 56: 867-875. Informit. http://informit.com (accessed March 5, 2012).

Jacoby, J. and Kaplan, L.B. (1972). The Components of Perceived Risk. Proceedings of the Third Annual Conference of the Association for Consumer Research 3: 383-393.

Mariani, M. and S. Zappala. 2006. Risk Perception in Online Shopping. In Impact of e-Commerce on Conumers and Small Firms, ed. Zappala, S. and C. Gray, 179-89. Aldershot: Ashgate Publishing Limited.

Scarpi, D. 2006. The Fun Side of the Internet. In Impact of e-Commerce on Conumers and Small Firms, ed. Zappala, S. and C. Gray, 179-89. Aldershot: Ashgate Publishing Limited.