The historic argument has been that E-tailers have a huge convenience advantage and that a retailer must combat that by leveraging its experience/ambiance advantage. But with showrooming, the customer has already driven to the store, parked, walked to the aisle and found the desired product. The physical store has the convenience advantage 10 times over.
The customer can pay for and take that item home right now or he/she can launch a browser/mobile app, navigate to the product, process that purchase, most likely pay for shipping and then still have to wait days or more to get the product. (With Bestbuy.com, the products may never arrive, but let's not go there.) The brick-and-mortar has been dealt four aces, and it's still somehow managing to lose.
This merged-channel psychotic episode began when Target CEO Greg Steinhafel dispatched a memo to the chain's top suppliers and a copy was diverted to Citi Investment Research's chief retail observer, Deborah Weinswig. The memo was begging the suppliers to help Target fight off the likes of Amazon. It stated explicitly that "consumers now expect a seamless cross-channel experience, want complete transparency on price and using technology to find the best deals regardless of retailer or channel," and then proceeded to say that it didn't want consumers to achieve those things.
"What we aren't willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands, create a superior guest experience, provide hundreds of thousands of jobs and support local communities," the memo said.
But that's the point. If Target was creating a superior guest experience—or even an equal guest experience—this wouldn't be an issue. With showrooming, we're not discussing a consumer at her PC or looking at her mobile phone, debating between clicking to Amazon or driving to Target. The scenario being discussed starts after the consumer has already chosen to physically be at Target.
The rest of the memo discusses "a differentiated guest-focused assortment," plus the usual retail supplier request for tightening margins.The rest of the memo discusses "a differentiated guest-focused assortment," plus the usual retail supplier request for tightening margins.
Differentiation is great. But in the context of the memo, differentiation is not being used to offer better products for consumers as much as it's being used to frustrate consumer attempts to price and product compare.
Not only is showrooming a battle where Target can win without such tactics, but the battle will be getting even easier. Amazon's various sales tax concessions have created a situation where it will be charging all customers sales tax in less than a year, with some states happening much sooner. And when Amazon folds it sales-tax-avoidance tent, so will just about all other major E-tailers.
Therefore, not only will E-purchases typically have the burden of shipping costs and delivery delays, along with the lack of an easy return mechanism, but their current tax-holiday advantage is also evaporating.
The real question that Target needs to address is how it is losing customers who are already in its stores. Target's prices are generally quite aggressive, so it's not as though there is usually a huge price difference with Amazon. Even a long checkout line doesn't explain it. How could a consumer be impatient enough to not accept a checkout lane but simultaneously be patient enough to wait 3 to 6 days for home delivery?
Even the Amazon gambit that Target and others have attacked as pure showrooming—the multi-day mobile price-scan effort from last month—really wasn't much of an attack. It was more successful at sending its customers into the open POS arms of brick-and-mortars coast-to-coast.
Target's memo identified the issue, but glossed over it: "Create a superior guest experience." That's arguably what JCPenney is trying to do with the store makeovers it announced Wednesday (Jan. 25). JCPenney's approach—which will take years to complete—is to remake its stores as a maze of 100 different Sephora-like in-store shops, along with a heavy dose of Apple-Store-like customer service.
It turns out those Sephora shops inside JCPenney stores move far more merchandise per square foot than the rest of the store—and without Penney's typical discounting, even though all the goods are also available online. No wonder that looks attractive. It's the perfect solution to the showrooming problem: Sephora gets customers to come in for the whole customer experience, and then to walk out the door with products in hand. No one, it seems, has to keep those customers from checking for bargains online.
There's no way of knowing whether JCPenney can actually spread that formula to every department, or whether trying to capture some of the Apple Store design magic will work, either. And even if JCPenney can make it work, that might not be something Target can adopt.
Still, if a Target customer felt comfortable with the friendly, helpful and expert associates just a few feet away at the store, do you think Amazon or Buy.com would have a chance at that sale? Let alone Macys.com or Walmart.com?