Are smartphone empowered consumers wandering through your store aisles and ready to buy somewhere else really a big deal? They don’t have to be. Hint: The lowest price isn’t always the law
Showrooming is a hot button issue topping the lists of retail trends to be most wary of in 2013. Articles with headlines proclaiming “Click Kills Brick” and “Retailers Scramble to Fight Showrooming” are predicting the demise of bricks and mortar retail.
Most recently the focus was on Best Buy, the largest electronics retailer in North America that has been forced to close locations and lay off hundreds of employees in Canada, as an example of the impact of showrooming. Sears and HMV are also feeling the effects.
Some point to Amazon for starting the retail doomsday clock ticking when it introduced its “Price Check” mobile phone app late in 2011. The app enables in-store shoppers to scan or search a product. It then immediately compares prices from Amazon.com or its merchants.
In the U.S., 43% of adults have participated in showrooming, according to a survey of 2,249 consumers conducted by Harris Interactive. It’s a frightening statistic for retailers concerned as smartphone penetration continues to rise along with the crippling overhead costs of running big box formats. And of course showrooming is just one dimension of the larger trend of massively expanded choice available to wired consumers willing to shop via e-commerce.
(Marc Andreessen, the co-founder of Netscape takes one of the more extreme views on the future of retail thanks to e-commerce. In a recent interview with Pandodaily he predicts the death of brick and mortar retail by the end of the decade. “Retail guys are going to go out of business and e-commerce will become the place everyone buys,” he says. “You are not going to have a choice.”)
But the experts who spoke with Marketing for this article generally agree concerns about showrooming are overblown, particularly in Canada. As with many marketing trends fueled by technology, the hype could be bigger than the impact.
Sure, some shoppers will treat retail locations as showrooms, try out a product and possibly purchase it somewhere else. But comparison shopping isn’t new, after all. Rather than focus on the penny pinchers that love the thrill of the chase, retailers should adapt, innovate and engage. Maybe they can turn the retail model on its head to deliver a worthwhile in-store experience. And with large American retailers like Target and Nordstrom moving north, there’s more pressure on Canadian companies to up the ante for consumers who are already faced with other options, online and off. Retailers need to invest in their stores and learn more about their customers to get them in the door and keep them there. Bottom line: retailers need to do better.
POST INDUSTRIAL RETAILING
Around the world, progressive retailers have started experimenting with new retail models to lure shoppers and keep them spending in store.
One way for retailers to respond to showrooming is to “create a must-have in-store experience,” says Jeff Lancaster, managing director of Outrider Canada, search marketing consultancy in Toronto.
The Burberry store on Regent St. in London was designed as a physical representation of the luxury brand’s website. Clothing in the store is embedded with chips, which can be read by screens and mirrors that might show how the garment was worn on the runway, or details of how it was made. Adidas introduced interactive digital storefront signage to stores in China, Russia and Germany that allows passersby to browse merchandise without using an app or scanning a code. Items can then be purchased from the individual’s smartphone.
Canadian fashion retailer Simons introduced a new technology driven concept for its 115,000 sq. ft. space in the West Edmonton Mall, its first location outside of Quebec. The company hired interior design firm Figure 3 to identify specific target demographics (or “typologies” as the firm refers to it) to help translate Simons’ private label brands into physical spaces within the new location. A denim wall was equipped with gaming stations for its Djab label which targets the teenage “skater boy,” for example.
Another section of the store includes a giant iPad replica that lets shoppers take pictures of their in-store experience and share it with their social media networks. “The retail environment can’t stand alone; it’s one piece of the puzzle in terms of integrating and delivering on a much bigger experience,” says Figure 3’s Jennifer Young. “All of these elements are all just touch points in the larger shopping experience. I think that’s what everyone is exploring… We’re firm believers that consumer insight and really understanding your typologies should inform and drive your design.”
Sport Chek’s newest digitally led location in Toronto let’s vendors get in on the action. Reebok, for instance, installed a build-your-own sneaker kiosk. The finished product is shipped to consumers four-to-six weeks after they create it in-store.
Doug Stephens, president of Retail Prophet Consulting, says Canadian retailers need to experiment and break free from an antiquated retail system that has gone relatively unchanged since the industrial revolution.
“We’re moving from being an industrial age system to being a digital age system,” says Stephens. “And that’s really the pain and disruption that a lot of retailers are experiencing… as consumers we don’t depend anymore on stores for distribution of product.”
Or, retailers can follow in Target’s footsteps. The Minneapolis-based discount chain, which is set to open its doors in Canada this spring, sent a letter to vendors urging them to create unique products for Target that would help set it apart from competitors and thwart showrooming.
WHY DON’T YOU UNDERSTAND?
While showrooming and the surge in e-commerce are real threats to retailers, the underlying problem is a lack of shopper insight and understanding of shoppers’ attitudes, says Jason Dubroy, VP managing director, shopper marketing at DDB Canada.
Retailers need to identify the value and strategic purpose of their brand, be cognizant of trends and stay on top of pricing strategies. Follow up with the consumer after the purchase through a loyalty program, for example. “Stay in touch with these folks and have memorable experiences that will then provide much more context for the next time they need what you’re offering,” says Dubroy.
Create an in-store experience to reflect the needs and wants of your consumer, adds Stephens. “Figure out who you are and use that as a template for the technologies that make sense to support the experience that you’re trying to develop and execute,” Stephens advises retailers.
Hointer, a men’s clothing store in Seattle, for example, is based on one simple insight: most guys consider shopping a 
chore. Rather than sifting through shelves of folded jeans for the right style, colour and size, the store keeps approximately 150 styles of jeans hung up by a wire across the store with QR codes attached. The shopper scans the code with an app and is prompted to pick a size and click “try on.” The jeans are then waiting for the shopper in a designated fitting room by the time they’re ready to start trying things on.
Consumer insight also drove the Sport Chek and Simons concepts stores. Sport Chek, for instance, made a massive shift to digital over the past 18 months after research revealed that 80% of its consumers are under 45 and consume media digitally.
During a tour of the new retail location, Duncan Fulton, the chief marketing officer at FGL Sports, told Marketing, “I think this is the first store where you can say it holds up to the brand really well from every aspect, from the staff to the design… and of course all the digital.”
A Digital Shopper Study conducted in September by Toronto research firm Fresh Intelligence found that 80% of Canadian shoppers would take greater notice of digital signage and 40% believe digital signage would improve their shopping experience. With statistics like this in mind, why is the Canadian retail shopping experience not more advanced or enhanced?
If retailers don’t provide shoppers with a digital experience, those shoppers will turn to the technology they have in their hands, says Lancaster.
“If you can integrate it and make it an easier user experience, you’ve got a lot more potential,” he says. “I think if you’re creating a good digital experience where people can kind of immerse with your store and your product and your brand in-store, I think it gives you a better fighting chance.”
THINKING SMALL, BEING FEARLESS
Part of the reason we don’t see more Canadian retailers experimenting with technology and the in-store space, says Stephens, is the fear of being first to market and possibly the first to fail.
“It’s a tight marketplace and news travels fast, so there is definitely a fear of failure,” says Stephens. “It’s not like the U.S. where you can just go off to some place in Iowa and try something and if it fails nobody ever hears about it.” But Canadians need to “toughen up” and try new things, he says.
Even if they do, it is still likely changing consumer behaviours will mean a new approach for retailers. Dubroy says he sees smaller scale, more community focused retail locations popping up in the near future. With less foot traffic, retailers won’t need large amounts of space. “There’s a massive consolidation happening, where you’re going to see much more experiential playgrounds where you can go and learn about things and you can either buy them on the spot from your mobile device or obviously buy them from a sales representative,” he says, using Future Shop as an example.
In October, the electronics retailer announced it was opening two smaller concept stores in Canada. The 5,000 sq. ft. store footprint is about one fifth the size of a typical Future Shop and offers “a seamless experience between in-person and online shopping.”
Still, the physical store location can be the starting point for the retailer/consumer relationship. It’s where the retailer can sweep a shopper off his or her feet and where the shopper can fall head over heels in love with the brand. Once that connection has been made it doesn’t matter which one of the retailer’s channels the consumer purchases from.
Dubroy says in-store technologies are really expensive but, if done right, give shoppers a better understanding about the history and heritage of a product.
While these ventures can be costly it’s a wasted opportunity for retailers to take a wait and see approach.
“Thirty years ago you could adopt a fast-follower strategy; you could say, ‘well we’ll wait and see…and we’ll let somebody else work out the kinks and the bugs and if it looks good we’ll jump on board,’” says Stephens. “The technology is moving too fast now, so by the time you let someone else vet it and trial it, you’re going to be too late to the table.”
Time will tell if these efforts pay off or if the brave retailers end up walking away with their tails between their legs. Or maybe the stragglers will ride the coattails of the progressive few and benefit from their learnings. The only thing that’s certain is that consumers will benefit in the end.
