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Friday, June 7, 2013

The Myth of “The Peril of ‘Showrooming’”

By John H. Fleming, Ph.D., Gallup Chief Scientist

In a recent article in BBC News Magazine online edition, Alex Campbell makes the case that “showrooming” -- customers doing product research in a brick-and-mortar store, but making their purchases online -- is a growing threat for retailers. He cites a study by design firm Foolproof that claims 24% of winter holiday shoppers in the United Kingdom “showroomed” their purchases in 2012, and 40% of those customers who showroomed actually took their business elsewhere. But Gallup’s research suggests that showrooming is more of a myth than a peril.

Our retail clients frequently mention showrooming as a concern, but we have found no evidence in multiple Gallup studies on the topic that the phenomenon even exists in the U.S., much less that it is a growing threat to retail stores. A 2011 Gallup Panel study of over 10,000 in-store consumer electronics shoppers in the U.S. found that 42% of those who did not purchase anything said they intended to or had already purchased the item at another retailer, but less than 1% said they intended to buy the items online. This is hardly evidence of a growing threat from showrooming.

The implication of the BBC News Magazine piece is that customers tend to shop based solely on price and that showrooming is the ultimate method of doing so. But Gallup research finds that customers shop based on price when price is the only thing that differentiates competing offerings. In other words, customers shop based on price when they don’t have an emotional connection to a particular retailer -- when they are not engaged as customers. In fact, over 90% of all consumer electronics customers in the U.S. feel that no one consumer electronics retailer is the best. The problem for these retailers is not showrooming, but failing to deliver a compelling and different brand promise, and then engaging their customers.

Results from this study show that “fully engaged” customers -- those with the strongest rational and emotional connection to a particular retailer -- and “actively disengaged” customers -- those with the weakest rational and emotional connection -- have drastically different in-store purchasing behaviors.

  • Actively disengaged customers were nearly twice as likely as fully engaged customers to leave without making a purchase on their last visit, 19% vs. 10%.
  • Fully engaged consumer electronics customers, on average, spent $373 during their last visit, compared with an average of $289 for actively disengaged customers. That’s an increase in spending of 29% compared with what actively disengaged customers spend. 
  • Fifteen percent of fully engaged customers who did not purchase anything said they intended to or had already purchased the item at a competitor’s store, compared with 63% of actively disengaged non-purchasers. 
  • There were no differences between engagement groups in their intention to purchase items online. In all cases, it was 1% or less.
Smart retailers know that there are ways to make their retail offerings “stick” with consumers and that is to engage them -- to connect with them on both a rational and emotional level. The surest way to improve engagement with retail customers is through the sales staff. A talented and engaged sales staff can help customers find what they are looking for -- prior Gallup research suggests that the perception that an item was out of stock is largely a function of not being able to find it -- and also recommend additional products and services, such as protection plans and other offerings.

Clearly if there is a monster under retailers’ beds, it is not “showrooming.” The real monster under the bed -- the real peril -- is retailers failing to create a compelling and differentiated brand promise that allows them to engage their customers.

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