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Show(room) Me The Money!

How consumers are using retail stores for everything…except purchases.

As retailers are going through a consumer revolution in the way you perceive and purchase products, there is a new issue on the horizon that is impacting big-box, category-killing retailers like Target, Wal-Mart and Best Buy – called “show rooming”.

If you have ever gone to a retail store (“brick”), found and examined the product you were looking for, and then went home to buy it online (“click”) you “show roomed”.

You scoped out the merchandise, but understandably wanted to pay the best price – which you found on the Internet. Regardless of the wait and the shipping and handling, you bought it electronically and saved. So, if you are the retailer who lost out on the sale, now what?

To combat this problem retailers have resorted to new approaches that will hopefully further benefit the consumer buying experience:

  • WORK WITH MANUFACTURERS TO MAKE EXCLUSIVE PRODUCTS. It can’t work for the little guys, but the big-box retailers have enough clout to request and offer unique goods not available anywhere else. Unique goods that you can defend as a reason for your retail loyalty.
  • OFFER COUPONS DIRECTLY TO CONSUMERS VIA MOBILE PHONES.  Daily-deal alerts, exclusive discount paperless coupons, and loyalty reward specials are easy to pick up and use right at the cash register with your smart phone. These are the equivalent of personalized prices and may be the most strategic way retailers will beat the web competition at their own game.
  • EMPHASIZE IN-STORE PICKUPS FOR ON-LINE ORDERS. As a consumer, you won’t have to pay the shipping fee and can have the instant gratification (well, almost instant) within the hour. Retailers get insure that you bought at their website and no others. Maybe while you are picking up your new DVD player at the store you might buy some DVDs and popcorn too.
  • HAVE RETAIL CLERKS SEND CUSTOMERS TO THE WEBSITE IF THE PRODUCT ISN’T ON THE SHELF. Under the category, "if you can’t beat them, join them" credit the online purchase to the store closest to the address of the customer who ordered via the Internet.
  • MAKE THE PROCESS SEAMLESS.  Invest in computers and tablets for the retail store associate/retail selling floor to identify your previous purchases and make it easy to get what you want, when you want it, no matter where you are -- at the store or at the home computer.
  • AND BE AWARE OF THE FUTURE. According to a recent Advertising Age study and report on retailing, “giants such as Amazon, eBay, Google and Living Social are all looking into the potential of physical stores.”  

Just what we need…even more choice.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Joe Dice May 01, 2012 at 01:01 PM
It's a conundrum. Customers go on line looking for a deal, but like the reassurance of a live person to answer questions as well as the feeling of holding a product in their hands before they purchase it. What's a retailer to do? Actually, Lauren hits the nail on the head in her post: they have to do both. It goes without saying (but we'll say it anyway) that every online retailer should have a professional, well maintained site where self-serve customers who know what they want can go and be rewarded with a good deal (while they're there, you have the perfect opportunity to maximize the sale by upselling or presenting related products). Meanwhile, for those customers who are not as tech savvy (or just prefer the physical act of shopping), the bricks-and-mortar experience should be as rewarding as possible. This means customer service is more important than ever: if a customer gets in their car and drives to your store, it's because they need help making a purchasing decision, and it's the job of the salesperson to provide that help. There are no more retail "salespeople" anymore. There are only Customer Service representatives On the one hand, these can be confusing times for retailers. On the other, it presents a multitude of new selling opportunities for those who are willing to embrace the changing faces of both technology and retailing. Or, to put it another way, there has never been a better or more important time to "give the people what they want."
Lauren B. Lev May 01, 2012 at 03:32 PM
I thank you for your comments and I very much agree that retail marketers have to reexamine the rules given the digital economy. Many who know what it takes to build one of the two environments (brick OR click) are discovering how to join forces so both can benefit. (Nordstrom and the men's wear designer Bonobos are a recent example.)
John Cocchiola May 02, 2012 at 05:22 PM
I enjoyed your article! I really don't see how the brick and mortar stores can compete with Amazon or other online stores. The rents and property taxes in high traffic areas where stores should be located, plus losing market share puts the Borders, Barnes and Nobles, Tower Records and Blockbusters at a huge disadvantage. Actual stores mean more payroll, more rent, more layers of taxation. Stores are more labor intensive, and a lot of the labor will need to be paid higher wages. It's a lot cheaper to have a warehouse with lower paid employees in Kentucky or Texas than to maintain a storefront on Old Country Road in Mineola. Mom and Pop video stores were knocked out by Blockbuster, Blockbuster was knocked out by Netflix and streaming video, Music Stores were knocked out by MP3s, book stores were creamed by Amazon and E readers, it's exciting and a little scary. The costs of doing business are too high to do things the old way, so I think we're seeing the dinosaurs vanishing before our eyes. Things have always changed, blacksmiths were put out of business by automobiles, television repair shops (we had 6 0r 8 in Glen Cove when I was a kid) were put out of business by better TVs and so it goes. Because of technology, the spontaneous order of our economy is changing faster than ever these days. Don't blink.
John Cocchiola May 02, 2012 at 06:24 PM
If I was on a board of one of these retail companies that's been hurt, I think I'd suggest opening small stores, or even Kiosks at malls with no inventory, just some samples and a very knowledgeable sales staff. People could go in, talk to a sales person, have the opportunity to pay cash and have the item delivered to their home. It might be electronic equipment, it could be books or music. A Barnes and Noble with no books, just a few very literate sales people (no zombies) to help answer questions, suggest books, point customers in the right direction and complete the transactions. For music stores, maybe the option to plug an MP3 player in right there and load music directly onto it. Book stores can give the option to load directly onto an e reader. No inventory to store, no shelves to stock, no shoplifters, small stores or Kiosks mean no huge rents. Just well paid, efficient, knowledgeable sales people to answer questions and help with the transactions.
Joe Dice May 02, 2012 at 08:53 PM
You make a great point, John. It would be easy to set up a "pop up" store with a few employees and a bunch of iPads tethered to stands where people could place their order on line while having their questions answered (and a chance to see and hold a for-display-only product). True, they wouldn't be able to walk out with the product in their hand, but with 1-2 day delivery that shouldn't deter most shoppers. On the other hand, it wouldn't help the local economy, since you'd still be running a skeleton crew with no back-end warehouse help. The larger question then -- which is beyond the scope of this post -- is how do we as a community and country transition from a manufacturing economy to a service economy? The old jobs are gone and not coming back, and many in the workforce are not only too old to train for a new career, but often transitioning from jobs for which there are no current equivalents. During 30+ years as a graphic designer I was able to go from working at a drawing board to working at a computer, but other fields aren't as flexible -- especially those in manufacturing. I loved your analogy about blacksmiths, but I wonder how many of them were able at the time to find a new career once their smithing services were no longer needed? As you rightly point out, things change more quickly these days, and I fear that a lot of people have already blinked -- and missed the opportunity to change with the times.
Pam Robinson (Editor) May 02, 2012 at 09:07 PM
This is all great stuff--I'm really enjoying the conversation. When I watch certain old movies on TCM, I am always struck by the large numbers of people employed at any given store--it always looks like a small army. Today, stores would be happy to have those same numbers as customers.
Helen May 02, 2012 at 09:29 PM
Oh, boy....great comments, everyone. I know quite a bit about retail and let's just say everyday is full of new ideas and when they don't work - well, let's go back to what we did last week. The big bosses of the big retailers are in a whole lot of hot water and a lot of that is because they shouldn't have been put in charge. You have financial people in charge of retail stores. They have no experience. They have power but now experience. You need to understand the business you are in from the soup to the nuts, no doubt about it. What works in one industry won't necessarily work in another. From what I see, people NEED to physically hold most items for sale. They don't like the idea of just ordering it.....and I don't see the brick and mortars going bye bye completely.....how and what their revisions/changes/improvements should be - well, there are ideas, but we all have to wait and see. I agree that changes are coming and whether we blinked or not - the transition just may not be there for people regardless of age - it's just downsizing across the board.
John Cocchiola May 03, 2012 at 04:19 AM
Jerry, I might have read a little too much Hayek in my formative years, but from my perspective, the goal of a businessperson isn't to help the local economy or to compete, those are byproducts of his success. A businessperson't goal is to achieve. He will help the local economy and the local economy will help him, but that just organically happens. The businessperson will succeed or go away; unless it's GM, GE or Goldman Sachs, there are no safety nets. Also, I don't think we need to make a transition from manufacturing to service, we're still building in this country. Not much here in NY, or California, or highly taxed states, but they're building 'foreign' cars all over the south. Michelin and BMW just built two big plants in South Carolina. They won't manufacture here in NY, the taxes are too high, that's our loss and I think one of the reasons the population of our state is shrinking. The local governments need to stop looting business, stop treating them like ATM machines, and they'll come back. How many blacksmiths made the transition? How many TV repairmen made the transition? I guess the smart ones did. Human Beings are an amazing animal, we're not driven by instinct. We learn, we think, we decide, we act, we consciously adapt. That's how we're armed, big brains and free will.
John Cocchiola May 03, 2012 at 04:32 AM
Helen, I agree some people need to hold things, but keeping a store with a lot of inventory and work force is becoming more challenging. We've seen the Whiz go out, Circuit City, Sam Goody, Virgin Records, Tower Records, Borders, quite a lot of others. The Source Mall is dead in the water, Broadway is dying. Every time one boards up, the others should pick up some of their business, but I don't see the few survivors doing that well. In spite of most of their competition taking a powder, Best Buy doesn't seem to be doing that well. Their stock was trading at over 50 bucks a few years ago, now it's in the low 20s. I've been running a small business (restaurant) for many years, so I know a little about the costs of doing business, but retail is another animal. I went on a buying trip with a friend that owns a shoe store, I was amazed at how much money he had to lay out every time he carried a new product, keeping in mind that it could be out of style very quickly. Scary stuff for a guy with a little store. He can't carry a huge selection, he can't buy product in the kind of bulk to get it at a significant discount. The little guy is being squeezed out for sure, but the big guys seem to be staggering too. Helen, there's an essay I love by someone named Leonard Read called "I, Pencil". If you haven't read it, you might enjoy. http://www.fee.org/library/books/i-pencil-2/
Jenny May 05, 2012 at 09:31 PM
i agree. this is a really great conversation....
Maria Mesquita May 05, 2012 at 11:46 PM
you're so right. Times are changing very fast. I've been doing what Lauren calls "show-rooming" for a while now. I started with shoes. I cannot think of buying shoes online without trying them on. However, the ones I like are much cheaper at Amazon, so, I go to a store, try them on, and then buy them online. However , I am nostalgic of the times when Old Country Road in Mineola was thriving with business. Changing is continuous, it's a reality. We have to adapt and be creative. In the meantime, exercise frugality.
John Cocchiola May 07, 2012 at 03:59 AM
It's telling that Microsoft just bought 17% of Nook (Barnes and Noble's e-reader) for $605 million dollars. I suppose they want content for their own tablets. With Microsoft's muscle and dollars, Nook will be much more competitive with Apple and Amazon, which means we'll likely see e book prices drop. Fun stuff to watch.
Lauren B. Lev May 07, 2012 at 05:42 PM
One of the issues to consider is prior to digital/ecommerce, consumers who were "cash rich and time poor" had an option of direct marketing -- catalogs, inbound telemarketing, direct mail, etc. to order products without benefit of a retailer. Digital has its backbone in this discipline, but direct marketing didn't destroy the brick/mortar retailers either. They just added to the noise -- with another distibution channel and choice. That is what we are experiencing here, as I do not believe the retail store operation can ever fully go away.
John Cocchiola May 07, 2012 at 06:40 PM
I don't think digital killed, or is killing brick and mortar stores on its own, it's getting a lot of help, but it seems to me that it's inevitable, at least when it comes to books and music that stores are on their way out. My Mother is 95, she uses and loves her Kindle because she can make the font as large as she needs to. If I owned a bookstore and I saw a 95 year old with an e reader, I think I'd worry. Barnes and Noble partnering up with Microsoft looks a little like a hedge, they're looking ahead. What do you think the value of the the brick and mortar part of Barnes and Noble is? I have no idea, but I'd bet it's not 600 million, which is what they got for only 17% of the Nook portion of their business. Can 17% of their digital business be worth more than 100% of their business? What do you think the overhead (rent, taxes, maintenance, power/light and payroll) is on on that Barnes and Noble on the corner of Glen Cove Road and Old Country Road? How about the one on the Miracle Mile? Manhattan? I haven't bought a CD in more than five years, I haven't bought an actual book in more than two, it's just about all digital now. Even the people that like first editions and rare books, thanks to E Bay, the dusty old stores are almost all gone. I'm not saying any of it is bad, not at all. I think it's just something that happens.
John Cocchiola May 07, 2012 at 08:57 PM
Btw...I hope you don't think I'm arguing, I'm just having fun kicking this stuff around. I'm amazed at how people, how businesses 'make' money, and I think it's more challenging now than ever. When I see a huge store, like a Barnes and Noble or a Best Buy, and I think of all of the things it takes to make that store profitable, and I think of the obstacles they need to overcome, the costs, it's a wonder they can keep their doors open, even in the good times.
Lauren B. Lev May 08, 2012 at 12:24 AM
Continuing the book retailing analogy, part of the reason, to my understanding, about why B&N has survived this long, was due to B&N embracing online sales and the e-readers and technology. According to web reports, Borders at the same time invested in more and better retail outlets, an inventory of CDs and DVDs (as the world was going digital) and of course, no e-readers. They had, for a time, used Amazon to manage their online activity as well -- rather than integrating the store and the site internally. A bunch of mistakes leading to bankruptcy.
John Cocchiola May 08, 2012 at 02:22 PM
No doubt, but with more an more people buying electronic files to replace actual books and music, the actual stores will become less and less profitable. I sure wouldn't invest any money in them. Look at what e mails and online bill paying did to the post office. They lost 3.3 billion dollars in their fist quarter of this year, which is supposed to be their best quarter. They don't need to adapt, the tax payer is on the hook for their losses, but if they were a business, they'd have been long gone.

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