Retaining customers who browse in the showroom and purchase online.
The buyer’s journey has evolved and has become more complex, intertwining between the physical and digital worlds. The primary reason for this is that consumers browse through multiple platforms before they make a purchasing decision. This changing shopping pattern calls for a seamless omni-channel experience. But the question is, have retailers really realized its impact?
The concept of Showrooming – when a customer browses through products in an offline brick-and-mortar store but purchases online – a probable threat to brick and mortar stores, is quite a controversial one.
In the context of Consumer Packaged Goods, a survey by McKinsey of more than 2,500 consumers revealed that a significant number of consumers – more than 70% – rely on the internet to shop. In the case of high-value verticals on the other hand, a survey by PayPal suggests that shoppers use online resources for research purpose but tend to buy from a store.
Indeed, the reasons for concern for retailers are real.
According to Retail Dive Consumer Survey, the notion of “see in store, buy online” has been confirmed and is on the rise. More than half of the surveyed customers stated that they visit stores to feel the product physically and then order online later.
Technology is, indeed, disrupting the brick and mortar retail business. According to Sunil Gupta, a digital strategy expert, some of the actions to safeguard store business can be matching prices with e-tailers, using anti-showrooming tactics, improving customer service, asking manufacturers to create exclusive stock keeping units, focusing on installation and repairs, and emphasizing instant gratification. But, there are certain problems with these approaches and they’re not as easily done as they are said.
Showroomers – fight them or welcome them?
Let’s discuss an HBR case study regarding Benjy’s, a $40 billion dollar electronics and appliance retailer with 2000+ outlets in the US. According to the case study, 83% of people shopping for electronics and appliances were practising showrooming. As a result of this, sales had crippled, leading to a loss of $700 million.
In this situation, the retailer can either play offence, defence, or both. While the offence strategy will include providing more discounts to the customers through Benjy’s app and matching the online price, the defence strategy will be to convince more suppliers to impose minimum advertised prices on the online retailers so that there is an appropriate floor price for every product.
An extreme defence measure could be to use thwart the object-recognition software using large display screens. However, it is mostly a short-term measure and will alienate the shoppers further. Therefore, a skillfully crafted offence strategy is also equally important.
To create a unique value proposition, the products need to be differentiated from anything else that is available online. There is only so much you can do to make products like electronic goods appear exclusive. However, a crucial factor that all retailers seem to miss is obtaining direct feedback from prospects and existing customers so as to understand why they shop from showrooms while others don’t; what is the key factor that motivates them to opt out of buying goods from showrooms instead of simply opting for home delivery. Therefore, it is imperative for retailers to provide an omni-channel experience to customers at every touchpoint.
How to integrate omni-channel retailing?
Improving supply chain
After selling for decades in its department stores, Macy’s made a big push into omni-channel retailing, allowing customers to have a seamless experience between shopping online or at a store. Customers could browse online and then experience the product at a store or order online after seeing the products at a store. Omni-channel, however, is not all about ordering; it’s also about fulfilment. Orders placed on any channel could access Macy’s entire assortment. By 2012, Macy’s had equipped 292 Macy’s stores to fulfil online orders or orders from other stores that were sold out of a particular item. If customers desired, orders placed online could be picked up at select stores, and items purchased online could also be returned to stores.
The approach of Macy’s is similar to what W.W Grainger practised where 50% of the units and 30% of sales dollars were shifted to customers from Grainger stores. Post-2001, Grainger embarked on a network redesign where the fulfilment of online orders was shifted from stores to distribution centres (DC). The key here was to take advantage of picking and transportation efficiencies by aggregating online order fulfilment from DCs.
Streamlining in-store and in-app experience
Customers often have latent needs that marketers can barely fathom. One classic example – Best Buy found out that customers often like to order a TV online but prefer to pick it up from the store themselves. Best Buy will probably go down in history as the poster child of efficient management in the face of disruption and survival. It did so by making tangible changes that mattered. In 2012, the consumer-electronics retailer was in a tough spot with increased competition from Amazon. Post this, it had to make many changes in its business and supply chain structure to reach where it is today. Today, shoppers on the Best Buy application can filter their searches based on which products are available at a store, thus focusing on the importance of real-time inventory insight for implementing a seamless omni-channel shopping experience.
According to Sharon Shook, lab technology officer at PointSource, “Filters like the one used in the Best Buy app are the natural evolution of the omni-channel retail experience. Achieving success in this area is all about making the purchase as painless as possible for the customer, and mobile features like this filter do just that,” he said.
Differentiate based on experience
While an online Benjy’s will find it difficult to compete with Amazon based on the price and stocks, it can have other points of differentiation, for example, the user interface. If you go to Amazon website, you can see all the recommendations for a particular product, but you do not have someone selling personally to you or responding to your vague queries. This could be in terms of showcasing better photograph of products or fielding unfocused queries of the customers.
If we look at the trend in the past few decades, the wind is surely blowing in the direction of e-commerce and retailers like Benjy’s mustn’t fight it. Leaders need to understand the potential of the emerging trend and reshape their business’s nitty gritty in such a way that they are not only able to survive but also maintain their position in the e-retail battleground.
While showrooming is definitely a threat to brick-and-mortar stores, we have examples of retailers like Macy’s that show how brick-and-mortar stores can retain their category leadership. Of course, this involves embracing a strong digital and omni-channel strategy and executing with the customer in mind. One of the things that mustn’t be forgotten in this race to become “omni-channel” is the customer’s journey. It is extremely important that retail brands keep the customer journey in mind and restructure by laying the foundation of design thinking and customer centricity.
I believe we are about to witness some of the biggest transformations in retail in the coming years and omni-channel retailing is definitely something to watch out for!
What do you think?