We are all consumers and have bought some products or the other unless I am addressing a hermit. Every consumer is unique and behaves differently from others. Each person buys a product for his own reason or reasons. People differ widely in their purchasing behaviour. Further, the developments in the world have not only caused the business to grow exponentially over the past half century but also has changed the way we buy. One might be tempted to think technology as a boon to business, but think again. Technology in the hands of the common man has empowered him beyond the level that is comfortable for the business. Information technology is one such force that has catapulted his power over the market and has influenced his buying behaviour. Internet has, over a couple of decades, has developed into market place – marketspace – for the exchange of goods and services. E-business or E-commerce has now come to stay and is slowly occupying an important place in business transactions. Even the online stores are gaining prominence.
Customers’ varied buying patterns
Human beings are supposed to be rational. However, marketers know that people are not always rational. Without getting into that debate of rationality, customers are known to maximize the value of their purchase. Customer value is the ratio of the benefit that a customer will get from a product and its cost. The customer value is measured in monetary terms, such as when a product helps save money for the customer that otherwise would have been spent. Sometimes, the customer value is difficult to calculate, as in the case of enjoyment a customer receives from a product. Businesses identify the value its products can provide to customers and come out with a value proposition. This is basically the benefits that a customer would get by buying and using the product. Advertising are good examples of value propositions. However, when it comes to buying, price sensitivity is the biggest driver.
“Showrooming” is a new phenomenon that is catching up fast. It is the practice of viewing an item in a retail store and then buying it online, in other words, shoppers use the store’s physical location as a showroom for products instead of a place of business. Consumers go to physical stores to check out items they’re planning to buy. For example, maybe a customer is purchasing a refrigerator and he or she isn’t sure of the appropriate size. The consumer would check and look at the product first in a physical store. Or in other cases, the consumers may go to test the picture quality of a TV, or fragrance of a scent. This practice has brought the e-commerce threat directly to bricks-and-mortar retailers. With smartphones in hand, the shoppers can immediately compare the prices and browse e-commerce websites as they stand in a store. This raises the showrooming threat to a new level. According to the new Accenture Seamless Retail Study, 73% of shoppers have showroomed in the past six months. This trend affects the bottom lines of the brick-and mortar stores while benefiting the click only stores who have the advantage of lower overhead costs and mostly can avoid sales tax.
An Australian store owner made headlines recently by declaring a $5 charge for shoppers who were “just looking.” This was an attempt to discourage showrooming. In order to fight showrooming, Target Corp., a leading retailer, coerced its suppliers to offer products that can’t be found elsewhere. It also increased nearly four times the number of items available on line. Wal-Mart Stores is emphasizing in-store pickups for online order and thereby allowing customers to avoid shipping charges. However, in spite of these maneuvers, the real catch is pricing. Lower prices are one of the reasons for buying from click stores.
Large retailers, with their overhead spread thinly, often have better prices online than in their stores; Target.com’s are 2% cheaper than those in its stores and Wal-Mart’s are 1% less, the William Blair study found. Unfortunately, traditional retailers dislike the idea of emphasizing the price difference between their online and their stores because they want to avoid competing against themselves. However, this may be changing, analysts say, as stores realize that the competition isn’t between stores and websites, but between their websites and other websites. Best Buy and Flipkart, in addition to offering fast, free shipping to their best customers, are also matching online rivals’ prices, which also helps build loyalty among their best customers.
In a recent report from BI Intelligence, the effects of showrooming are:
- It has a massive impact on every day sales:
- Specific retailers, such as JC Penney, suffer more from the practice:
- Retailers are responding in dramatic ways: A popular anti-showrooming strategy might be described as the “information blackout.”Some retail chains are blocking cell signals in-store, or adopting proprietary barcodes that won’t allow shoppers to check prices at competitors’ sites. This can backfire – as it is tremendously annoying to customers.
While showrooming may be a bother to the retailers, they will likely be delighted to hear of a new consumer trend: “webrooming,” or browsing online but buying in-store.
Webrooming is “more of an indication as to how the shopping experience has evolved for most consumers,” according to Renato Scaff of Accenture. “Today’s shopper expects to be able to shop easily across different channels to fulfill their shopping mission. In fact, it is expected that well over half of retail sales will be influenced by online and mobile, regardless of where the ultimate purchase is made,” Scaff says. The study by the Accenture shows that 84% of the shoppers do use their phone while they are still in the store, but mostly to look at the reviews as well as price comparisons, says Brad Tuttle of Time magazine.