Is Showrooming a Problem For E-tailers?

Discussion
Nov 05, 2013

Similar to showrooming at physical stores, consumers are shopping at some websites, but then going to other sites to make a purchase at a cheaper price.

That’s the view of John McCarvel, president and CEO of Crocs, Inc., in explaining why internet sales in the Americas region fell 32.8 percent in the third quarter to $11.2 million.

"We’re certainly pleased to see that on Amazon.com in July, 23 of the top 100 styles sold were Crocs," Mr. McCarvel said on a conference call with analysts. "However, we believe we’re seeing some of the same showrooming challenges experienced by retailers in electronics and other categories that is impacting Crocs’ direct growth of our own already significant e-commerce business."

Crocs has built a "sizable e-commerce business in the U.S. that was built up years ago ahead of other brands." With increased distribution at Amazon.com, Zappos.com, Shoebuy.com and other websites, a portion of that business is moving away. The offer of prime shipping capabilities on Amazon adds to the incentive to shop elsewhere.

"So we just see it as a shift more than it is actual consumption dissipation," says Mr. McCarvel.

He also implied that price is often lower elsewhere due to algorithms that gauge online pricing. Mr. McCarvel added that the company is "not chasing revenue by giving away margin dollars" to lift sales in its own internet business. Crocs.com over the weekend was offering a 30 percent discount on its classic clog model that seems to be most heavily promoted elsewhere.

Asked whether selling in more promotional e-commerce or retail environments would also impact its physical stores in the U.S., Mr. McCarvel said expansion beyond the Cayman clog to boots, loafers, and other items is helping Crocs own stores offer more limited edition and segregated product to avert direct price competition.

"Is it going to be perfect?" said Mr. McCarvel. "The answer is no, but it is going to take us a little bit of time to work through that. But there’s a clear strategy and plan in place to be able to make it a win-win situation."

Among the majors that have launched price-matching policies due to showrooming concerns is Best Buy and Staples, while Target and Walmart don’t. Apparently a more complicated process, shoppers at bestbuy.com and staples.com have to call a toll-free number to verify a price match.

Is showrooming a similar challenge for vendor or retailer websites? Will price-match guarantees and other showrooming defense measures eventually arrive online?

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15 Comments on "Is Showrooming a Problem For E-tailers?"

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Ken Lonyai
BrainTrust

Hmmm… I didn’t know online price shopping was something new? I’ve done it and probably most internet shoppers as well.

For the segment that’s not price sensitive, convenience and speed will always be the foremost factors in where they choose to shop. So as long as a m/e-tailer can maintain those benefits, they will have a certain loyal following. For those that try to get the most from every dollar and are willing to invest extra time shopping, putting up with substandard web sites, shopping carts, customer support (if any), and shipping, and don’t mind vendor hopping, e-showrooming will survive.

So like physical retailers, web properties have to carefully look at their market, decide what drives customers to their brand, and determine if they are a price based retailer or a brand/service oriented retailer. From there, they can make strategic and tactical decisions to determine if “showrooming” is or is not part of their vocabulary. If price based – good luck with the race to the bottom. If brand/service based, they simply have to maintain a stiff upper lip, forgoing the price sensitive segment of their market.

Todd Sherman
Guest
Todd Sherman
3 years 11 months ago
There are at least two of different topics wrapped up in this article. The first is manufacturers/vendors going direct to consumer. In that case, different companies have different goals and strategies. Some WANT to act as a showroom to help customers see what’s available, and then expect those customers to buy the product at their site of choice where the pricing is more aggressive, they already have an account, better shipping, or even purchase offline in a local store. Other manufacturers want to grow their own online businesses and need to be price competitive and/or offer better service (i.e. free/fast shipping) to get the sale. Direct to consumer has benefits, such as greater margins captured by the manufacturer. But it also has risks, including being competitive with their distributors and retailer, which can push the retailer to carry a reduced number of SKUs or drop the product line completely. Traditional channel conflict issues. The second is showrooming between online sites. Price competition has long been the norm online. Comparison shopping sites, including Google, turned it into a industry. Third-party sellers on Amazon often function in the same manner – except that Amazon gets the sale and the commission (without having… Read more »
Peter Charness
BrainTrust

A price check is one click away for any online retailer, and it’s fast and easy. Save the customer the problem, and webcrawl for competitive pricing and make sure yours are properly set to begin with against your competitors. Even a price match guarantee that forces any additional key strokes will erode business to companies like Amazon.

gordon arnold
Guest

In e-commerce, Amazon means showrooming. With a beginner understanding of how they run their business and a look at growth numbers, it is most obvious that showrooming is Amazon’s path to success. So to conclude that brick and mortar stores are more effected by this consumer trend is a mistake. It is just as important to understand that online shoppers aren’t looking for guarantees, they are looking for low prices and will look all day to find a deal.

Arie Shpanya
Guest

Online retailers can combat “showrooming” in a similar way that brick-and-mortar can – by adding value in other ways (better shipping and return policies, for example, or providing loyalty offers, customer reviews and detailed product information). Or if price is the real focus, there are price monitoring and dynamic pricing platforms available for online retailers which can help them make adjustments and re-price as needed, according to their strategy/set parameters.

Todd has a lot of good points regarding channel conflict in the Crocs example given. Coming from the manufacturer’s POV, it seems like part of it could possibly be a MAP monitoring issue. Just as retailers have ways to monitor prices, manufacturer’s can also monitor retailer’s prices to ensure MAP compliance to make sure they are not pricing too low and diluting the brand.

A few blog posts on showrooming that may be relevant: here, and here.

Doug Fleener
Guest

I wouldn’t call this showrooming, and to Ken’s point it isn’t anything new. I use Amazon.com as a product search engine, and from there I identify whether it is available in stores and on other sites.

I don’t see most consumers going to the problem of price-matching online. They’ll just buy where the total price is cheaper. That’s the risk the online retailers have when commoditizing products and service.

By the way, I think it would be crazy for a manufacturer to price match on their own site. Talk about competing with your customers.

Jannie Cahill
Guest
Jannie Cahill
3 years 11 months ago

Whether consumers choose to showroom — looking at a product in-store before finding the best price online — or e-room — browsing the Internet to also find the best price online — price remains the key determining factor in a shopper’s purchasing decision.

Technology is enabling shoppers to find the best price, whether that be in-store or online, and this increase in price transparency is inevitably having an impact on both retailer and vendor direct websites, as is the case with Crocs.

As one of the previous comments pointed out, however, competitor price monitoring services are now available which enable retailers to benchmark their prices against Amazon and other retailers to ensure they offer the most competitive price on the market.

With consumers increasingly driven by price, retailers need to stay price competitive. Monitoring your online competitors’ prices every day is the most effective way to compete and take advantage of the continued growth in showrooming/e-rooming.

Jesse Karp
Guest
Jesse Karp
3 years 11 months ago

E-tailers will certainly face similar “showrooming” challenges that other traditional retailers encounter. Added services such as free express shipping, easy login and suggestion algorithms will create a similarly competitive environment which requires e-commerce sites to adapt.

Just like brick and mortar stores, however, e-tailers will need to compete on these services, personalization and added benefits such as loyalty programs, customer experience, etc. If e-commerce sites try to compete on price alone, they will never be able to win against the Amazons and Zappos of the world.

Craig Sundstrom
Guest

I agree with the others: going to multiple websites isn’t “showrooming,” it’s simply shopping, and it’s what people have always done. And I would expect the response from e-tailers will be similar to what their forbearers did: some will develop a reputation for selection, others for service (easy-to-use sites, money-back guarantees, multiple shipping options, etc.) and others will fall back on price; at least that was the way the world worked before the race-to-the-bottom (price) mania starting taking hold.

Joel Rubinson
BrainTrust

Of course! It is even more of a problem for online retailers because in a way, the internet is like one big store that facilitates comparison. On the other hand, showrooming is overblown as a problem when it comes to brick and mortar retailers.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
3 years 11 months ago
When I bought my Dyson vacuum I went to Dyson.com to use their extensive product descriptions to decide which model I wanted. Then, I shopped other websites for price. I bought elsewhere because of significant cost savings. That’s my standard shopping M.O. and I’m definitely not the only one. For research (I’d never wear those things) I went to Crocs.com and looked for the Mario Batali Bistro Edition clogs. That’s because I’ve never seen anyone else wear Crocs. At Crocs.com the Bistro Mario Batali Edition ventless in orange sells for $44.99. Unfortunately, their free shipping doesn’t kick in until the $60 level. At Zappos.com I could get the same item for a penny more – $45 – with free 2-day shipping using my (free) VIP.Zappos membership. A net savings for me. Plus, the Zappos return policy (nearly limitless) is superior to Crocs’s. Why do companies allow other retail sites to undersell them? Why not? I think Todd Sherman expressed it best, and I paraphrase: Why shouldn’t companies like Crocs be ecstatic with their sales through other websites? They’re reaching so many more shoppers that way. If this doesn’t please Crocs, then they can get competitive on price and services and… Read more »
Kenneth Leung
BrainTrust

At the end of the day, consumes are looking for solution to their problems, not just price. For price sensitive products with no brand loyalty, the customer will showroom on both directions (web and store). For web retailers selling undifferentiated products they face the same challenges as their store counterpart.

Bill Davis
Guest

Sure showrooming happens online. It’s due to the price transparency provided by the web. This: “He also implied that price is often lower elsewhere due to algorithms that gauge online pricing” is going to become much more commonplace going forward.

Mark Price
BrainTrust

It seems like the challenge for Crocs is specifically around channel conflict, where their products can be found on other sites for cheaper than on their own. This problem is a frequent occurrence for manufacturers who have built their own e-business, and is not a function of showrooming as much as consumers shopping in the channels in which they are the most comfortable.

Alexander Rink
BrainTrust
3 years 11 months ago

Consumers have been comparison shopping for years, and definitely “showroom” to some extent online: reading about product information, or going through reviews on the more “polished” or comprehensive websites, and then purchasing on the site where the price is best, where the shipping policy is most convenient or where they feel the security is greatest.

Will these retailers deploy counter measures? Some may. But much like the bricks and mortar world, trying to stop the showrooming will backfire. The best solution is to right-price your products and offer customers the best experience (in terms of price, shipping, checkout etc.). It may even be advisable to help the consumer to comparison shop without leaving your site, such as by using a “Compare at Widget,” a little box on the product page that highlights competitors’ prices to prove to customers that they’re getting competitive prices.

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