Say you want to buy a washing machine. You find that Amazon is selling it 15% cheaper than your neighbourhood appliance store. Odds are, you will buy it from Amazon. This phenomenon, where customers get information from offline stores before buying online, is known as showrooming. The greater the difference in prices, the greater the probability of customers showrooming. This has become a major problem for brick and mortar stores as it eats into their sales.
Offline stores have tried to counter this phenomenon through price matching (e.g. Best Buy, Reliance Mart) and offering customers the options to buy from their online stores or in-store kiosks (e.g. Staples, Star Bazar). Many other retailers have doubled down on service. The belief is that the better service provided in an offline store will offset the price difference. However, the critical question for an offline retailer is: to what extent can one counter showrooming through service, and is it enough? A recent research study attempted to answer this question (bit.ly/2ULmr27).
Offline retailers are already struggling due to an economic downturn, lower footfalls resulting from government restrictions in the face of the pandemic, and generally lower consumer confidence because of fear of exposure. Showrooming can add considerably to their woes. Lower sales impacts revenues and, ultimately, the bottom line. Moreover, to counter losses, offline retailers can and do resort to a reduction in staffing.
To counter showrooming, offline retailers need to understand that the single most significant cause is perceived price fairness. Perceived fairness implies the perception of equality between input and output. In this case, input includes the actual price that customers pay. The output consists of the product that is purchased and the service that the retailer provides.
The study results show that, at a price difference of 20% between offline and online retailers, providing customers with service can result in a 36% fall in showrooming. Customers are 36% less likely to purchase online after getting information about the product from the store. Similarly, chances of offline purchase increase by 29% when in-store service is provided. These are significant numbers, proving that availability of service plays a critical role in forming customers’ perception of output equity, which can be the difference between them buying in-store or showrooming.
Two aspects of service play a role in perceived price fairness. The first is service availability, that is, how long a customer has to wait for service. The longer a customer has to wait, the more negative their attitude is. The second aspect is service quality, that is, how the customer is treated at the store. Apart from general courtesy, this aspect includes how well customers’ needs are understood and responded to, whether the staff push higher value sales needlessly and so on. These core-service interactions have a powerful impact on in-store purchase decisions.
The implication for offline retailers is painfully obvious. Since they cannot match the prices of online retailers in the long run, the only way ahead for them is to increase the perceived price fairness of customers through high quality and quick availability of service. Only by enhancing the in-store experiences of customers might they persuade customers to forgo the benefits of the actual price difference and buy products in-store. Showrooming is a reality of the digital age, and while it is impossible to mitigate it completely, offline retailers can survive by utilising the appropriate service strategy.
Disclaimer: The views expressed here are in the author’s personal capacity and do not represent those of people, institutions or organisations that the author may be associated with in professional or personal capacities.