A new study by GroupM Next and Catalyst suggests that showrooming is a “growing threat” to Canada’s traditional brick-and-mortar retailers, particularly if they fail to adapt to the growing phenomenon.
Showrooming is the practice in which customers make visit a brick-and-mortar retail location to see an item they want to purchase, but then use their mobile device to search for a better price and ultimately purchase the item online.
Because they have less overhead, online retailers are often able to undercut their brick-and-mortar counterparts by a significant margin.
The study called Retail showrooming in Canada: Winning the consumer & the price of keeping buyers in-store found that while the showrooming practice is common in Canada, there are marked differences between Canadian and U.S. consumers.
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For example, that study found that 20% of Canadian consumers would prefer to remain in-store and purchase an item, compared to only 10% of Americans. And while a majority of Americans will leave a store if offered a mere $5 discount, it would take a $15 discount to get the same number of Canadians to leave.
While price is the foremost consideration for Canadians, it is not the only factor that influences their decision. The study found that shipping time and familiarity with the retailer also factor into Canadian consumers’ decision to either stay in-store or purchase online.
If two-week shipping is the only available option, for example, 5% more consumers will buy-in store compared to opting for one-week shipping.
Brian Cuddy, account director with Catalyst, the search marketing arm of media services company GroupM (which has examined showrooming previously), attributed the difference in part to a more developed e-commerce market in the U.S.
“The U.S. is much further along [when it comes to e-commerce] and retailers are much more competitive and have much more robust strategies,” said Cuddy, who said that higher shipping rates in Canada – as well as duties on items purchased outside of Canada – might also factor into consumers’ decision.
While predicting that the Canadian e-commerce landscape will eventually come to resemble that of the U.S. in coming years, Cuddy said there is no guarantee that Canadian consumers will ultimately mimic the behaviour of our neighbours to the south.
“There are some things, like geography, that are potentially bigger barriers for us,” he said. “Those specifics might cause this phenomenon to be a little bit different.” Things like smartphone penetration and the cost of showrooming versus the U.S. could also ultimately determine how it evolves, he said.
“I do anticipate that people will become a little bit more price-sensitive, but I don’t know if it will replicate the U.S. exactly,” said Cuddy.
The results are based on an online survey of 2,000 Canadian shoppers, asking about 12 products across multiple retail categories at different price points. The respondents were given a hypothetical showrooming scenario in which they could purchase a given product and own it immediately, or take a discounted price, leave the store and have the product shipped.
While most shoppers were keen to purchase immediately, the study found that even a minor discount was enough to entice them to leave the store and buy online. While 74% of shoppers indicated that they would purchase in-store if the online price were only 2.5% less, that number dropped to 63% when offered a 5% discount online.
Just over a quarter of Canadian respondents (27%) indicated that they would stay in-store when presented with a 20% discount. The study also found no significant difference in attitude between English and French consumers.
Of the 12 products measured, headphones proved the most susceptible to the showrooming phenomenon, with respondents demonstrating an “implied urgency” towards their purchase. A set of tires is the second most likely to have an implied urgency, with a laptop computer the least.
The study also painted a portrait of the average Canadian showroomer. They are slightly more likely to be female, with an average age of 58 and a median annual income of $50,000. Half have a college education or higher, while more than half (53%) make online purchases once per month.
The study also found that showroomers exhibit behavourial cues that retailers can learn to identify in order to intervene at what it called “key decision-making moments.” The study indicates that Canadian consumers who interact with a sales associate are more likely to stay and complete a purchase in-store.
There is growing evidence that retailers are combating the showrooming phenomenon. Electronics retailer Future Shop, for example, provides consumers with easy access to locations, reviews and prices on its mobile app, encouraging showrooming in what the study called a “controlled way.”
The company also has a “robust” price-matching strategy that beats competitors’ prices by 10%. Other Canadian companies including Loblaws, Real Canadian Superstore and Home Depot all engage in price-matching their competitors’ flyers and promotional discounts, the report noted.
Target, the newest entry into the Canadian retail market, has found a way around the phenomenon by offering exclusive in-store items. The company might also extend what the study calls an “aggressive” price-matching policy beyond the holiday season.
