Search the site...

  phil mora
  • The Global Nomad
  • About
  • Portfolio
  • Contact and Book
  • The Training Log
  • The Global Nomad
  • About
  • Portfolio
  • Contact and Book
  • The Training Log


​The Global Nomad
(JAN-APR 22 = currently in the Philadelphia area.)

about

Show-rooming or the brick and mortar vs. web battle

6/3/2013

0 Comments

 
Picture
Picture
Picture
Picture
Due to lower costs, web retailers can profitably sell products more cheaply than their physical store — and with a few clicks, it's often more convenient for customers to buy online. To combat showrooming, retailers should try these four strategies instead.

[Reproduced from Harvard Business Review]
Brick and Mortars (Still) Can't Beat the Web on Price
[06.03.13]

Change is an arduous process. Whenever I have to make a big change in my life, I tend to go through three phases. First, I simply wish ("somehow it will happen"). When that doesn't work, I'll look for a quick Hail Mary fix. (Sadly, those specially formulated seaweed pills didn't help me lose 1 to 2 pounds a day). Finally, still stuck in the same situation, I realize that I have to confront the challenge and strategize to make things happen.

Brick and mortar stores have been muddling through similar stages in dealing with the emergence of low-priced web retailers. The facts are incontrovertible: due to lower costs, web retailers can profitably sell products more cheaply than their physical store — and with a few clicks, it's often more convenient for customers to buy online.

When first challenged, brick and mortar stores responded with a nebulous rebuttal of "we'll offer better service" as a counterweight to their price premiums. That hasn't worked very well. Next some retailers have tried a Hail Mary tactic: "We'll match the best price you can find on the Internet." The logic here is that without the price-match guarantee, the retailer was going to lose the sale, so sales gained by this policy are incremental revenue (which results in gross profit as long as the price at least covers merchandise cost). The downside is customers become trained to play the game of checking prices on the Internet first, which has negative long term effects — you can't make money when more and more of your customers start paying incremental prices.

The allure of cheap web prices has recently blossomed due to mobile phone apps that direct users to a lower price on the same product, generally at an Internet retailer. Many of these online retailers offer free shipping and, for the moment at least, many don't charge sales tax (which at 9.25% in Chicago, for instance, adds up). These apps encourage "showrooming," the practice of customers checking out merchandise in physical stores and then purchasing at a discount on the web.
                                                                                                                                    [more]
Brick and mortar retailers need to realize that selling the same products as established web retailers do, even with price match policies in place, is not a viable long term growth strategy. To prosper, physical stores have to change their merchandise selection. The following four categories of merchandise create reasons — hence, value — for customers to visit stores:

Well-branded, highly differentiated, and exclusive: This was a centerpiece of Ron Johnson's plan for J.C. Penney — a strategy that I argued was brilliant but ultimately derailed due to other factors.

Non-exclusive with a twist of differentiation: Adding some type of uniqueness — even to common products — creates value and minimizes price comparisons. Target tried this last year, but no reports have since surfaced regarding its success.

Non-exclusive and non-differentiated but at a discount: With showrooming, manufacturers benefit from consumers being able to see and touch their products in physical stores. I've argued that stores should demand a physical store equalizer discount from manufacturers so at the very least, they can profitably compete on price against web retailers.

Non-exclusive, non-differentiated, no discount, but advantageous to buy at a store: Some products are easier to purchase in stores. Fashionable clothes, for instance, benefit from being tried on prior to purchase. The lower the product price, the less likely the web vs. store price differential will result in showrooming. "It's only a 10% difference" is more manageable on a $100 product than, say, a $1,000 one.

The optimal merchandise assortment is a mix of the above products as well as generic items that are also available at Internet retailers. And counter-intuitively, these generic products can be priced higher than what web rivals are charging. How is this possible? First, a large segment of customers simply prefer to shop in stores. As gas stations do, retailers can charge more for "full serve." Just as important, even discount-minded customers drawn to stores for unique products may out of convenience pick-up a few premium-priced generic products. After all, how many times have you visited a grocery store to purchase loss leaders but ended up loading your cart with products that aren't deals?

The brick and mortar vs. web battle has long been portrayed as one based on price. Viewed through this lens, physical stores simply can't win — it's time to forget about competing on price. Instead, the mantra for brick and mortar success should be "creating and capitalizing on value." Stores should offer products that provide reasons for customers to visit stores, leverage this differentiation to sell additional generic products, and focus on customers who prefer shopping in stores.
0 Comments



Leave a Reply.

    head of product in colorado. travel 🚀 work 🌵 food 🍔 rocky mountains, tech and dogs 🐾

    Picture

    Categories

    All
    Change Agents
    Experiences
    Fitness
    Hacking Work
    Technology

    Archives

    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    January 2016
    October 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    February 2013
    January 2013
    December 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    January 2012
    December 2011
    October 2011
    September 2011
    August 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010

    RSS Feed

Phil Mora
​San Francisco .Rennes .Fort Collins .Philadelphia
Phone: (415) 315-9787 . Twitter
@philippemora .  braintrust | polywork | behance

Copyright © 1999-2022 Marshall Tucker by Bold (MT2B) All Rights Reserved