Coupons work because they are only used by people who are price sensitive. The only people who use coupons are those who think it is worth the time and energy to find the coupon, clip the coupon, store it in a place where he can find it, and remember to use it during checkout. These people trade small chunks of their life for a better price. Coupons are GREAT for sorting price buyers from other shoppers. Since they usually only save shoppers dimes at a time few people actually use them.
Showroomers also trade a slice of life for a better price. They have to search online for a better price, order it, enter their credit card number and then wait for it to be delivered. (In case you don’t know, Showrooming is when people shop at brick and mortar stores to find what they want, then buy online at lower prices.)
The key difference is showrooming has the potential to save shoppers much larger amounts of money. A 25% savings on a $100 item is $25, more likely worth investing time and effort.
One quick lesson, we shouldn’t see much showrooming on lower priced items, only the large ticket items. So let’s not worry about the small stuff.
However, for the big ticket items, “showrooming” has always been a problem, just maybe not so pronounced. Long before the Internet existed, when I was much younger and very price sensitive, I remember going to Any Mountain Sports to try on Ski Boots. They had great selection. ÊThey had great service. Most important, they had the expertise to fit ski boots. Once I found the boots I wanted, I said “let me think about it” and then went to Tri-City in Fremont (a warehouse sporting goods store) and bought them for less. I was showrooming long before the Internet existed. ÊAnd I wasn’t the only one. ÊMy friends did the same.
The problem isn’t the Internet. The problem is that some high priced items are sold at both high service retailers and at low priced outlets (like warehouses or the Internet.) The Internet makes it easier for shoppers to find these low priced sellers, but the problem hasn’t changed.
The solutions haven’t changed either. High service retailers must focus on two strategies. First, select the right suppliers. Retailers should try to work with manufacturers who are successful at keeping products out of the low priced channels. This isn’t always possible, like when you want to sell the most popular brands. They can be found everywhere. If this is the case, be sure to find other brands who do protect their retailers to fill out your offerings.
Second, you must focus on the customer who will pay for high service. Face it, you charge premium prices compared to the Internet. What do your customers get for it? I’m not asking what extra costs you incur – they are irrelevant. I’m asking why should someone shop at your store instead of buy from the Internet. I can think of many reasons: instant gratification, helpful salespeople, customization of the product, installation, training, sense of community, after sales service and fun shopping experience. What are you offering?
Here’s the important point. No matter what you offer that adds more value than Internet retailers, you will not win the price buyers. Let me repeat that. ÊYou will NOT win the price buyers. ÊStop trying. ÊThey are going to buy from the lowest priced retailer no matter what. Instead focus on the shoppers who value what you offer.
To bring the story full circle, Any Mountain Sports is apparently doing well. Tri-City is out of business.
Mark Stiving, Ph.D. Ð Pricing Expert, Speaker, Author
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