Have you ever visited a store just to try on shoes before making a final purchase? Or, perhaps you listened to a salesperson tout the merits of various printer models before deciding to save money by purchasing one online. If you’ve done this, you’re “showrooming.” Showrooming refers to the process of going to a physical store to learn more about a product before making a purchase online at a lesser price. Consumers can view and try out things before committing to a purchase.
Stores have long been warned about the dangers of showrooming and online purchasing. The worry is understandable; some point to the failure of retailers like RadioShack and Circuit City as evidence that showrooming is a problem. Furthermore, studies have shown that this kind of consumer behaviour is detrimental to traditional stores. Showrooming increases competition and decreases margins for stores, putting pressure on prices.
It’s not always the case, though. Best Buy, which actively promotes showrooming, and Amazon, which has invested in traditional storefronts, have both found increased success in recent years. This indicates showrooming may be more nuanced in practice than previously believed.
Consumer Influence on Market Prices
The notion that showrooming automatically results in lower retail costs has been debunked by our recent study. Instead, our research shows that showrooming might have the opposite effect and drive prices up. In our study, we considered several different kinds of buyers. While some shoppers were more selective than others and hence gravitated towards stores offering a wider selection of goods, others shopped around to find the best price. Customers who shopped in showrooms didn’t waste time comparing costs because they had already done their homework and knew exactly what they wanted and needed.
Some customers didn’t participate in showrooming because they didn’t have time to visit multiple stores, while others didn’t want to make the salesperson waste time by buying the product elsewhere. Others, however, were not as picky and would happily make a purchase from a store with a smaller selection if they discovered something that worked for them. They shopped about until they found a place that was a good fit, or left.
Based on our findings, pricing decisions should only be made with this final type of consumer in mind: the one who isn’t too picky and doesn’t shop around. The prices of goods and services in any market are set by consumer preferences and behaviours. Most buyers, including showrooms, do not shop around, which is why showrooming can drive up prices. As a result, several retail establishments have raised their prices, however marginally.
Retail Environments and Buying Habits
There is a major distinction between our study and others like it. Our analysis took into account three distinct retail settings where customers might learn whether or not a product is right for them.
The first kind of store is called a “deep store,” and it sells a wide selection of items from a single category. For instance, Best Buy stocks a wide variety of televisions so that each customer can pick the set that best meets their needs. Shoppers in deep stores are more likely to make a purchase, thus the stores can charge greater prices. Customers with high standards often purchase here.
The second kind of store is called a “shallow store,” and it sells a wide variety of products across numerous categories but a limited number of brands. Deep shopping experiences can’t be found at Walmart or Costco. Less picky customers choose to purchase at these stores because of the lower costs.
Last but not least, internet retailers provide the largest selection of products (sometimes at the lowest costs), but customers can’t try them out first. Retailers’ product pricing strategies are influenced by the demographics of their customers across these three channels.
Deeper Ramifications
Depending on price sensitivity and the general mix of different types of consumers, retail prices could rise as showrooming becomes more prevalent and easier to accomplish owing to internet buying. People’s shopping habits are ultimately determined by the variety of retail options available to them. Retailers set prices based on the buying habits of their customers.
Our research reveals the consequences of showrooming are more nuanced than previously imagined, even though the perceived threat of showrooming has led to strong policy suggestions, such as one minister in Spain proposing businesses should tax shoppers for accessing changing rooms.
To fully grasp showrooming, one must consider how retailers adapt to customers’ changing shopping habits. When considering the impact of showrooming on prices and the retail industry as a whole, retailers, politicians, and observers should proceed with caution.
