Will 'showrooming' kill businesses?

[pickpackpockpuck]



...but I think that it takes a lot more emotional and intellectual effort to become successful, and the disparities between the good stores and the bad or mediocre stores is getting bigger and bigger.

I think the shops that will succeed either offer some kind of added value such as expert advice, superior service or a unique environmental experience. Or the merchandise is so exclusive in that you can't really buy it anywhere else. Everyone else will have to compete on price and convenience.

Yes on both. The shops that I like best (and assume are successful, though I don't know their finances) have a really focused identity and manage to engage with their customers on some level beyond just being a place to buy stuff. LN-CC does a good job of this, for example.

 

[Douglas]

LOL. Who "enters information into their smart phone?"

Bar code scanning, people. We have the technology.

Some people have already said it - this has been going on for a while, though this is the first I've heard the term "showrooming." Some businesses will die, others will adapt. There's no question service suffers. I'm all for maximizing value in the supply chain but the bottom line is that showrooms do create value by letting you touch and feel the merch. Some people want that service but don't want to pay for it, and their fate will eventually be that they can't have it at all. This bottom-line phenomenon, fueled by consumerism, fanned by cheap and easy access to information, leads to a lot of **** people say they don't like but actively drive anyways.

Baggage fees, food and beverage charges, and seat selection fees on airlines? Yeah, you asked for those things when you slavishly searched and searched for the cheapest fare.

Bullshit, trash-level home goods from places like Wal-Mart? Yeah, that too.

You'll note there's no such thing as a bookstore. There is such a thing as a coffee shop selling mochas at 95% profit margins with books in it, though.

You want help from a knowledgeable someone who actually knows where the books are, has read them, and can recommend others? Or whether or not that TV is compatible with a certain setup? Or how to use that camera, and which flash is best, and has it in stock?

These are businesses that adapted. You reap what you sow.

And people wonder why everyone who graduates with a BA ends up as a barista.

 

[Klemins]

When I shop online it's generally due to convenience and being isolated rather than bargain hunting. I may look around if a price seems outrageous but will gladly support a business I like that may be a little more expensive instead of buy from the cheapest option.

As others have stated, collabs add a uniqueness and security to different boutiques/shops, especially in fashion, but they may be too costly and simply not possible for many industries. Stores like Epaulet who rely largely on their own product are likely more immune but still be vulnerable to competitors with cheaper, more mass market alternates, especially if using the same materials.

 

[LA Guy]



I actually knew what you had try to say, but was somewhat giving you a hard time.
But don't fool yourself into thinking that people who grow up in a Judeo-Christian environment are incapable/not actively doing shady stuff.....World history from the past 200 years has ample history of such.

Sephora (I think, it may be another retailer) had to close shop in Spain because people were going in, using the samples, and just leaving. Moral of story: study new markets. One retail model does not fit all. Ikea in China is another hilarious retail story.

This has been happening since forever.
It's why Best Buy is closing stores and going out of business.

The Best Buy experience sucked, so they went out of business. They didn't take advantage of what a B&M can offer, and consequently, suffered. Same day, free delivery, for example, would be an obvious thing to set up for a B&M consumer electronics store. It's a service that you can offer for local customers at a relatively low costt, that an online only store with a warehouse in dickweed, New Jersey, cannot, even if they paid top dollar. Cheap and free or cheap installation for anything from air conditioners to home theater systems. Same day pickup and delivery for defective merchandise on they massive ripoff you call an extended warranty. They could also offer a price match guarantee, which takes away most incentives to showroom. Remember, online only businesses have lower overhead, but they eat a fortune in shipping and handling. You ever try to ship a t.v. by UPS? It's soooooo expensive.

Definitely don't make the Borders mistake (outsourcing their online distribution to Amazon, effectively making them a completely worthless company).

People showrooming have already done this and spend their time doing it, so why not just buy it then and there.
If you add up what your time is worth that is a lot of wasted time.

It's not time wasted unless it's opportunity time lost. If you weren't going to be making money during that time, you've lost nothing and gained something by showrooming.

How would you guys suggest B&M stores compete in the online market? Prices are generally set based not only on the cost of goods, but other considerations like local rent, utilities, staff salaries, maintenance, etc... all of which varies widely based on where the store is located...but a store that has to set their prices higher to operate in, say, NYC has to compete against other retailers online, whether they're in smaller cities that helps keep costs down or just online-only.

With all due respect, this is a cop-out. One thing that I do is compare prices (of clothing and accessories) everywhere I go. And NYC prices are actually usually better than prices in smaller markets for the same goods. If your prices are not good in NYC, the customer will just walk a few blocks to get the same thing. Vendors give "exclusives" to specific neighbourhoods only, and even then, sometimes say "*******", and sell the same goods to different retailers on the same block. I know this because I've actually walked Manhattan blocks and visited every single store and inventoried entire stores (trust me, it's a grind. I do not do this when I go shopping for pleasure.) Also, being in a larger market allows you to sell more volume. This goes double for the internet side of your business. So, you sacrifice margin for volume. Of course, things are always a gamble, and you'd better have your sales projections pretty accurate, or you could easily end up in the red.

I know that Canadian retailers suffer because they have some high taxes, but clearly, matching prices with US retail prices makes sense if you want that market. Ssense, for example, does this. Yes, you eat some of the costs. But the alternative is to not have access to a market 10 times the size.

 

[Gavin]



With all due respect, this is a cop-out. One thing that I do is compare prices (of clothing and accessories) everywhere I go. And NYC prices are actually usually better than prices in smaller markets for the same goods. If your prices are not good in NYC, the customer will just walk a few blocks to get the same thing. Vendors give "exclusives" to specific neighbourhoods only, and even then, sometimes say "*******", and sell the same goods to different retailers on the same block. I know this because I've actually walked Manhattan blocks and visited every single store and inventoried entire stores (trust me, it's a grind. I do not do this when I go shopping for pleasure.) Also, being in a larger market allows you to sell more volume. This goes double for the internet side of your business. So, you sacrifice margin for volume. Of course, things are always a gamble, and you'd better have your sales projections pretty accurate, or you could easily end up in the red.

Ok, I was just making assumptions about NYC and the cost of doing business there...but not thinking for a second about the exponentially larger market and competition putting downward pressure on prices as well. Point taken and bad example.

I know that Canadian retailers suffer because they have some high taxes, but clearly, matching prices with US retail prices makes sense if you want that market. Ssense, for example, does this. Yes, you eat some of the costs. But the alternative is to not have access to a market 10 times the size.

Yeah, we're hit a few ways: we pay sales tax on goods bought from Canadian distributors, we pay higher import duties on goods brought in from abroad, we have higher MSRPs based on out of date exchange rate assumptions, we don't charge sales tax to out of country buyers (which to be fair, is fair), and it costs us more to ship...but, like you said above, you sacrifice margin for volume and your projections need to consider all of the above in their calculations. Off the top of my head, I think that Canadian stores like Roden Gray, Four Horsemen, Nomad, Ssense, and us are usually priced in line with our international competitors, give or take, but doing so means the dollars are coming out of somewhere else. Nomad, for example, has to be losing money on some of what they just sold during their last round of markdowns.

 

[Gavin]

Also, the retail side is all very new to me...and seeing it from this side is pretty fascinating.

 

[LA Guy]



Also, the retail side is all very new to me...and seeing it from this side is pretty fascinating.

Yeah, we're hit a few ways: we pay sales tax on goods bought from Canadian distributors, we pay higher import duties on goods brought in from abroad, we have higher MSRPs based on out of date exchange rate assumptions, we don't charge sales tax to out of country buyers (which to be fair, is fair), and it costs us more to ship...but, like you said above, you sacrifice margin for volume and your projections need to consider all of the above in their calculations. Off the top of my head, I think that Canadian stores like Roden Gray, Four Horsemen, Nomad, Ssense, and us are usually priced in line with our international competitors, give or take, but doing so means the dollars are coming out of somewhere else. Nomad, for example, has to be losing money on some of what they just sold during their last round of markdowns.

Well, the last round of markdowns is just a way of liquidating the excess inventory, which, if you are an astute buyer, you should have, but in minimal quantities, at the end of the season (if you have no excess inventory at all, or worse, run out of inventory at the beginning of the season, you are leaving money on the table.) Any and all revenues off those last few pieces is all gravy. It's certainly still more profitable than selling to a jobber or a discount chain, which usually will not pay more than $0.05 or so on the retail dollar. On the other hand, if you have to drop your prices at or below wholesale to sell a large fraction of your inventory, that's when you are taking a real loss.

 

[PhiPsi32]

It has, but people will go use the expert knowledge and then go buy it cheaply somewhere else.

This. The idea behind "show rooming" is that consumers go hands on with a product in store and then purchase it at a cheaper price online. The idea being that there is some value to seeing the product in real life. To some extent, this is a self correcting problem. As more shops fold up or reduce their inventories, consumers will have to grapple with products that are only available online. Online retailers can compensate for this effect by offering more generous shipping and return policies (as is becoming more common with clothing retailers). But these policies also push up the retail price attenuating the online discount. So while it may ultimately make more sense to pay the higher in store price and sales tax for the advantage of handling the product before buying, the convenience and perceived value of shopping online will lead to more internet sales.

 

[anbel02]

This. The idea behind "show rooming" is that consumers go hands on with a product in store and then purchase it at a cheaper price online. The idea being that there is some value to seeing the product in real life. To some extent, this is a self correcting problem. As more shops fold up or reduce their inventories, consumers will have to grapple with products that are only available online. Online retailers can compensate for this effect by offering more generous shipping and return policies (as is becoming more common with clothing retailers). But these policies also push up the retail price attenuating the online discount. So while it may ultimately make more sense to pay the higher in store price and sales tax for the advantage of handling the product before buying, the convenience and perceived value of shopping online will lead to more internet sales.

The economic downturn has made bargain hunters out of most of us. Most consumers don’t really care how, or even if, a retailer makes money. All they care about is which one has the best products at the cheapest prices. Now, some shoppers are going into stores to take pictures of merchandise, with no intention of buying. They go home, enter the items they want into a search engine, and find it for a much lower cost online. It’s great for them, and great for the online merchant but it is costing retailers business. However, some retailers are not taking it lying down. Retailers fight back against showrooming.

 

[El Argentino]

I don't have a lot of sympathy for the B&M stores. I'm sorry to cut it like that, but the customer is king, and if you're selling the same product at a noticeably higher price, you're cooked.

Case in point: I was looking for new soccer boots recently. Went to my local specialty store (not a Dick's or other massive thing, but a locally owned soccer-centered shop). They've been in the Valley for years. First thing I noticed was the 1 sales associate working the floor. Just one guy in the store w/ me. I asked about the new collection of Nike boots coming in for the EURO and he showed me the 1 silo they had received (Vapors). Looking for Tiempos or CTRs, I started browsing some older models. Looked through their discounted section - they had some predators and old boots from 4+ years ago sitting there for only 25% off retail. Continued to look around as he unboxed more and more boots to go up on the walls - all the latest colors in only a few select boots. In a last ditch effort, asked if they'd price match other retailers, be it local or e-retailers, in order to move any of this stuff. He said they couldn't do that. What's more learned their return policy is non-existant - essentially for merchandise credit only, but once you give them money it's a sunk effort. Finally decided to just try on a newer boot for kicks and giggles - asked for my size. He said they didn't stock up to a 12, usually ending their size runs at 11. Well slap me silly. Thanked him for his "time" and walked out. Will never even go in there again.

In comparison, I can go to a specific English footy website I know. Find the boot I want in the color I want, usually pick it up with some sort of special offer, and if not, STILL don't pay VAT, and have it shipped from England arriving in a week. Without the VAT and even w/ shipping I'm getting the boot for less than buying new from this shop. No contest here. If you can't compete with that sort of business, then fare thee well.

1) Didn't have comparable stock levels, diversity
2) Didn't have any method for dealing with request outside of their usual stock
3) Didn't have ability to price kill ancient merch to make room for the floods of new stock, thus cluttering the store.
4) Not only didn't currently have my size, didn't even order it on a regular basis.

E-shopping wins.

 

[Find Finn]



It's not time wasted unless it's opportunity time lost. If you weren't going to be making money during that time, you've lost nothing and gained something by showrooming.

If you already know you are going to buy the product online and you then use lets say 2-3 hours going to a shop and use petrol, wear and tear on your car and parking, on most smaller items you will have used the same amount of money if not more and you have to wait to get the product you want.

 

[curzon]

How is this "showrooming" any different than shopping around, i.e., comparison shopping, in days gone by? Now I have a greater selection of potential retailers, and those B&M locations that don't have an online presence... gotta wonder what they're thinking. I frequently purchase items from Frans Boone in the Netherlands - a B&M store more than 8000 km from my home. Long before the Internet a customer very often had to go without or at best "make do". Now the advantage is to the customer, were it ought to be.

 

[transient]

Things are gonna need to change real fast for a lot of retailers. Places like that soccer store El Argentino described are dead meat.

However, I can still see places with superb service shining. My example in this is REI. If you look hard enough you can probably find most of the gear they sell 5%-15% cheaper if you look hard enough. But I will still buy a lot of my gear directly from them; their staff is always enthusiastic to help and their return policy is amazing if you're a member, on top you get 10% off at the end of the year in form of dividends. I bought a zero degree sleeping bag last summer for $250 but realized recently that I want to get into ultralight backpacking which means this 4lb bag won't do me any good. No problem, I returned it a year later and they refunded me to another card. I also fucked up on sizing shoes and I simply exchanged after already wearing them. I'm not even out to abuse the return policy but the premium on their products is worth it for the piece of mind.

Also, sometimes you find the lowest price on froogle from some obscure online retailer and you know the transaction will be a pain **********. You'll place the order only for them to email you a week later that it's out of stock. Or they'll **** up the shipping, or just be generally unresponsive. This has been my experience when buying something at the floor price on eBay or online.

 

[Cunrad]

Well, I did something similar as descrbed in the OP. I wanted to buy some shoes I saw in the maker's online shop. I wanted to try the fitting of the last before ordering. So I went to alocal store carrying the brand, told them my intention of buying a specific shoe, and wanting to try it first. Since they didn't have it in stock, I said I'd order it from them instead of online. I was even willing to pay the 85,- euros premium, out of fairness etc. In the end i got a call from them saying they are not able to get the model I wanted.
If that happens regularly at retailers it's no wonder people are using them only as showrooms.

 

[LA Guy]



If you already know you are going to buy the product online and you then use lets say 2-3 hours going to a shop and use petrol, wear and tear on your car and parking, on most smaller items you will have used the same amount of money if not more and you have to wait to get the product you want.

This argument doesn't make any sense. You are going to do this anyway by shopping at a B&M. At least if you showroom, and then go home an buy it online, you've saved yourself some money. Unless you need that item right away, there is no financial incentive for you to buy it in-store when you can get it cheaper online. This goes extra for big ticket items, where a small fractional discount easily be hundreds of dollars.