Tuesday, June 5, 2012

Retail Show-down over Showrooming

Remember last December, when Amazon encouraged in-store shoppers to use its app for price-checking and offered a 5% discount for buying online instead of in the store? That was when showrooming burst into the headlines--consumers looking at products in stores and then buying from an online retailer instead.

Not surprisingly, bricks-and-mortar stores resent being showrooms for the online stores they compete with. With the economy still struggling, buyers notice the difference between store prices and online prices, and try to buy for less when possible. One study shows Amazon's prices 14% lower than Target's, for example. And that's a big reason why pioneer Amazon, known for low prices, is now the 11th-largest retailer in America.

Best Buy has been particularly hard-hit by showrooming. Because of its extensive inventory, Best Buy is the place to go for all things electronic, apparently even when the shopper plans to buy from Amazon or another web-based store. Now Best Buy is closing some of its big-box stores in the US as well as the UK. It will look into opening smaller specialty stores for specific product lines (think mobile phones). Smaller stores = lower costs and better service.

Watch for more changes as the retail industry seeks to combat showrooming through differentiation and, of course, price competition.

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