Will Retail survive Internet?

Written by Katrin Diederich and Isabel Couceiro

This topic just came up to my mind when I was browsing (physically) for some stuff for my toddler at a Baby store. I started to think that it could be a good idea to buy a new pram, as the one that we own is too weak for my super tall (and heavy) 2 years old boy`s actual weight and I will really need a stronger one to participate in the “Kids for run”. If I want to finish the 5km walk, of course… Probably because I was looking confused while staring at so many options, a lady from the store came to rescue me. The first question she asked me was “Have you already researched online”? Nope, the idea of buying a pram just came up to my mind while I was in the store. That question surprised me and really made me think that the way people buy (and sell) is changing as faster as our internet connection is supposed to be.

Instore shopping

There is a new phenomenon in consumer behaviour that has emerged in the last years and that now appears in many discussions and research papers; the so-called “Showrooming”. Kirthi Kalyanam and Andy Tsay describe Showrooming in their paper as “using the presentation and services offered by a brick-and-mortar channel but making the purchase in an online channel”.

If you take the time to talk to sales persons, let`s say from electronics or appliance stores, you will hear a list of complaints about how people in these days are messing up their business doing this “showrooming” thing. They (the consumers) spend hours walking around, pressing buttons, asking questions and in some way wasting sales people’s time. These consumers are carrying their smart phones in their hands, scanning bar codes, comparing features and prices, for, in the end, walking away without spending a single cent, leaving the sales person heartbroken.

Although this tendency has started a couple a years ago, physical retailers have needed some time to adapt to this new phenomenon and to fight back by developing a strategy to deal with this new reality? Some of the biggest retailers in Australia, as Toys”R”Us and Officeworks introduce the “price match policies”, aiming to stop, at least, this consumer behaviour. http://www.toysrus.com.au/price-match-policy http://www.officeworks.com.au/information/policies/lowest-price-guarantee

But others are still struggling with their consumers’ “nasty” behaviour without having a clue about what do. These companies are trying their best, or at least they think it is, to compete with pure online stores with regard to price, product and promotion. In the end, brick businesses are always going to carry the disadvantage of the store costs to deal with it but they can change the game by learning how to leverage their higher proximity to the client.

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9 thoughts on “Will Retail survive Internet?

  1. With the Online To Offline becoming more and more popular, a growing number of stores’ marketing start to combine with the Internet because online selling is cheaper than the store selling for its free rent. In addition, both customers and shop assistants can save a lot of time on the buying and selling. However store also has its irreplaceable place. Although, “Showrooming” can compare with the price and show the photos of products, some products like clothes also need customers to try and compare in the store, which is can not replaced by APPs.

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  2. A very good post indeed showing the modern consumer evaluation trends showing the instant comparision of prices online and reading the consumer reports and there post-purchase experiences with the product and services. The online channel of marketing may be the future of selling which is already gaining a lot of momentum at present and the business with physical stores need to counter or change their strategies to make a presence in online environment to keep pace with the changing trends in the global marketing environment. But not all things can be measured, evaluated and experienced onlinee are there are three categories of goods, that is, search goods, experience goods and credence goods. Only search goods can be measured reliably online rest two of the goods can only be exprienced and evaluated in person.

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  3. Hi Katrin & Isabel

    This was an interesting read. It’s a well debated controversial topic. I think retail has it’s place still but there is definitely momentum in terms of what can be achieved with online shopping and I agree some retailers are not there yet. You may recall the Harvey Norman story, where Gerry Harvey has been trying to impose GST for overseas stores. Read about that one below.

    http://www.abc.net.au/news/2011-12-23/harvey-norman-online-ireland/3745316

    Many people I know head to the web to checkout a product, determine a price match and then depending on the physical attributes associated with the product, either head to the local store and pay just that little extra or order online and be prepared to wait. Each route has it’s pros and cons. I myself recall very specifically trying to find a suitable swing set for my kids, interestingly with one product, you can only order this online and there is no local pick-up but the downside is a $100 delivery fee on a product that only costs $250. I am yet to order anything..

    Future speaking though, I do not see retailers standing up very boldly against the internet. Consider that we are only seeing the first stages of Cloud, what about Cloud 2.0, 3.0 and what about the internet of things? surely this will have a impact to shopping habits.

    http://www.retailonlineintegration.com/blog/the-internet-things-what-means-retailers

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  4. You are quite right about the increasing “Showrooming” trend and it covers all markets. A couple of years back one of the Gen Y’s in my office tried on the glasses at the optometrist’s store, then went and bought the same frames more cheaply on line – including the lenses. It is a marker of current consumer behaviour trying to make the best ‘value for money’ choice in a market burgeoning – increasingly so – with choices. For those of us that are time poor – me – the opposite I expect would be the internet search you mentioned at the start. In this case the consumer narrows down their search online and targets their actual physical shopping to those items they have identified as the options they want to have a closer look at. Some industries can offer both online and the physical shopping experience, but the real reason consumers are shopping around is for the best product at the best price.

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  5. I think you have brought a very interesting topic to our attention.The prevailing transition from bricks and mortar to online seems to be occurring in many industries.I truly believe that reduction in cost is the major motive besides other reasons such as displaying larger groups of products which might not be feasible to show offline.But some businesses have realized that the process of dis-inter-mediation is not harmless for their future so they try to divide sales tasks among new online presence and established bricks and mortar. Pursuing this wise strategy would enable a business to take advantage of the cost efficiency and other privileges of online while still using the off line channel. As a result consumers who are keen to buy from physical store due to high risk they associate with online purchasing can still refer to well established stores and also those who do the evaluation and selection process through the online channel would be finally directed by the company to stores to get the purchased product. In my idea physical presence of businesses can still reassure many consumers that if something goes wrong there are some people in real places ready to help.The need felt by some consumers for touching and trying products before purchase is something marketers should accept.Cannibalizing offline channels for many businesses still seems to be incompatible with attitudes and preferences of some groups of consumers.

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  6. On a recent trip to a small coastal town, I was a very surprised (and perhaps even offended) by a sign in a small bookshop which told customers they could not use their shop to research online purchases. I can only assume from this sign that this bookshop is finding it challenging to compete with the larger online book stores such as Amazon. However I would have assumed their customers were holiday makers and therefore more likely to make on the spot purchases. Therefore bookshop needs to take a better look at who their customers are and find a better strategy to entice the relaxed holiday maker to purchase a good book to compliment their vacation.

    Clearly new creative ways of attracting buyers to purchase in store are needed if retail bricks and mortar are to survive. Rude signs are not the answer.

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  7. Although I believe online will never entirely replace the traditional brick and mortar, I do believe that it is more than just the latest fad. The whole online phenom needs to be adopted by all business as another, more convenient, method of conducting business. As I type this now, there is another tab on my browser looking at asos.com.au, checking out a jumper that is on special this weekend. We live in a generation of ‘I need it now’ and convenience of being able to order a jumper online when you are feeling cold can never compare to having to drive down to the store (in the cold) get that jumper.

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  8. Hmmm it’s really interesting. It’s true some customers likes using “showrooming”, however some people do the other way around, and I’m one of them. I recently bought a new washing machine. Before I made the purchase, I searched on internet, comparing different models, brands, price and checking product reviews, then I decided which one I was going to buy. I went to Harvey Norman straightway, simply asked sales person a couple questions of warranty and delivery, and did the purchase within 10 minutes. The reason I do that? I personally like face to face shopping experience and also think physical stores, especially those with good reputation, are more reliable and they can provide better service in terms of exchange or refund if something goes wrong. In that way, physical stores actually benefit from online as the research customers have done save lots of “Q&A” time in store and make purchases quicker.

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  9. It seems that it is becoming increasingly difficult for traditional (physical) retailers to compete with online stores and because of this there are attempts to combine the two.

    These attempts will preserve the original physical shopping experience by maintaining a shop front but also offer the convenience of online stores. This strikes me as a rather uneasy alliance and one question to be asked is that:

    Is it worth the effort and the additional expense to maintain a physical store?

    Using physical stores for presentation seems to be a moot point given that most advertising is done online anyway. It may soon be the case – especially for convenience sake -if it is not already so – that people will be spending more time on the internet than they spend in the real world.

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