Best Buy, Wal-Mart: Showrooming’s Biggest Victims
Almost every retailer today is struggling with the “showrooming” phenomenon, but some are especially getting hit more than others. Wal-Mart Stores (NYSE:WMT) and Best Buy Co (NYSE:BBY) are at the top of that list, and are working to fight back, offering practices of matching prices at online retailers year-round.
For those wondering what showrooming is, you’ve likely done it without even knowing it. When you go into Best Buy, test out the iPhone 5, and then ultimately buy it the following week on Amazon (NASDAQ:AMZN), you’re showrooming. Thus, it is the practicing of browsing a retailer’s product only to later purchase it online for a lower price. And smartphones are only facilitating the problem. Customers are often glued to their phones when they walk into a retailer, and data from the analytics firm, Foresee Results, illuminates that 70 percent of consumers use a mobile phone in a retail store to research and help them price compare. Retailers are thus being forced to offer incentives to keep their customers in the store, and then at the cash register.
The practice is especially prevalent during the holiday season, but a new survey from Harris Interactive demonstrates that it ultimately happens year-round. The percentage of showroomers remained “virtually unchanged” between Nov. 2012 and March 2013. And which store is the biggest victim? Best Buy. According to the same Harris survey, 23 percent of respondents who said they had showroomed listed Best Buy as the store they most frequently did it at.
Wal-Mart followed Best Buy on the list, coming in at #2 with 21 percent of respondents, while Target Corp (NYSE:TGT) was third with 12 percent. These three brands are now forced to look for innovative ways to engage shoppers and lure them into the stores. According to a report in May by Mashable, Target announced earlier in the year that it would begin price-matching online competitors in an attempt to curb showrooming.
And unsurprisingly, that online competitor is more often than not the e-tailer giant whose name starts with an A and ends with an N: Amazon, the nemesis of brick-and-mortar retailers everywhere. The Harris survey confirms what we already know, and that is that Amazon is the online retailer that gets the most business out of showrooming, receiving 57 percent of all business from customers who first went to a store to check out a possible purchase. Of those customers who showroomed at Best Buy, 66 percent of them ended up buying from Amazon, compared to the 12 percent who actually purchased from BestBuy.com. Even worse is the percent of Wal-Mart showroomers who browsed at the retailer and ultimately went on to purchase at Amazon. Sixty-six percent of respondents purchased at the e-tailer, while 8 percent purchased from Wal-Mart’s website.
Though showrooming might be damning to retailers, it ultimately could help consumers, in that a retailer’s most common weapon to fight against showrooming is price-matching. Best Buy, Wal-Mart, and Target are all embracing this strategy — as well as discounts and promotions — to help them remain competitive.