Study: Most Showroomers Will Abandon Stores if Price Difference Is 5% Less Online

Electronics retailer Best Buy just reported this week that Q2 profits dropped by 90%. That's partly attributed to the weak economy and partly to the phenomenon of "showrooming," where shoppers look at products in stores and buy them later online. That phenomenon has always existed but it has been "exacerbated" by the rise of smartphones and in-store price comparisons. 

As more people buy and carry smartphones they're more inclined to use them in traditional retail environments.  

Consumer surveys have indicated anywhere from 50% to 80% (or more) of US mobile consumers now use their phones in stores for product and price information, as well as comparison shopping. Amazon and eBay have been big beneficiaries of this trend, but especially Amazon. Traditional retailers have in some cases suffered and in a few instances (i.e., Best Buy) showrooming has become something of a crisis.

Agency GroupM recently released some survey findings and analysis addressing the phenomenon of showrooming. Roughly 1,000 US adults were surveyed and asked about shopping scenarios and attitudes. 

As one might expect, the larger the price difference between in-store items and online prices the more likely buyers said they would be to abandon the store. But somewhat surprisingly GroupM found that even a 2.5% discount could have a significant impact on store abandonment: 45% of survey respondents reported they would leave the store. If prices were 5% lower online, 60% of respondents said they would leave. 

There is a difference between self-reported survey data and actual behavior. But the GroupM findings reflect the new consumer mindset.

GroupM identified the profile of a likely "showroomer": younger, female, heavy online shopper and lower income. It also found at the other end that 10% of respondents (loyal to the retailer) wouldn't leave the store regardless of online price discounts. However there's a "marginal showrooming" group that is somewhat price sensitive but can be influenced to "stay in the store."

Factors that GroupM identified to help retailers combat showrooming included the following: 

  • Good service and in-store sales help
  • Channel agnosticism, so if an item isn't in the store it can be ordered online and shipped via the same retailer
  • Retailer apps that offer useful information, including inventory 
  • In-store loyalty programs
  • Better online marketing to create additional incentives to come into stores (e.g., deals)
  • Price awareness that helps ensures prices remain within striking distance of online retailers which may have lower costs  

Providing good in-store service, which extends to retailer apps, is a key variable here and one that might cause retail executives to balk. They have generally been de-skilling their workforces for years. However they'll suffer the consequences of poor service and indifferent consumers if they don't do something.

Beyond this, a multi-faceted approach is called for, one that implies a great deal more sophistication than what's on display for most traditional retailers today.