The Showrooming Scramble: Why Retailers Must Embrace Customer-Centered Service Innovation
By Craig LaRosa, [email protected]
A consumer walks into a store, tries on a pair of running shoes, and then hops online to buy them from someone else—10% to 15% cheaper. It’s called “showrooming” and it has a lot of businesses scrambling.
Shoppers today are carrying around a multitude of competitors in their pocket. If they find something they like, they scan the barcode with their Smartphone and see who’s offering it for less. And with Amazon prices sitting 9% to 14% lower than most traditional retailers, brick-and-mortar shops are losing market share. For now, online retailers have the added advantage of no sales tax in states where they don’t have a physical presence (though a current bill in Congress may reverse the policy).
Consumers shop differently today and traditional retailers must adapt to stave off online competition or suffer further losses in revenue. It’s not just specialty shops that fall prey to showrooming. Big-box retailers like Best Buy, Target and Wal-Mart are also feeling the pinch. Best Buy’s first-quarter 2012 earnings are down 26%. In a call with investors, Best Buy’s interim CEO Mike Mikan admitted that their customer experience “is no longer unique as it once was.” Many speculate that showrooming was behind Target’s decision to remove Amazon’s Kindle product line from store shelves.
The solution for all retailers lies in bridging the value gap between online and in-store. It’s not all about pricing, rather the solution requires boosting the value of the brick-and-mortar shopping experience. And it’s not going to happen by making small tweaks. Delivering an in-store experience that will keep customers coming back for more requires all-out, customer-centered service innovation. Here’s how some retailers are innovating their services and winning back customer loyalty in-store.
Cater to your best customers. Nordstrom targeted moms with comfortable nursing rooms and shoe-tying lessons for kids. At yoga gear store Lululemon, local stores hand-select brand ambassadors who represent the Lululemon lifestyle, creating a community of consumer partners who are constantly spreading the word. Retailers that laser in on their most influential demographic resonate with consumers.
Turn the store into an experience. Jordan’s Furniture in Natick, MA isn’t just about shopping, but about entertainment, with an animatronics show, food, and an IMAX Theater. It upped the ante for in-store shopping and closed the value gap of buying online.
Make shopping “smaller.” Shoppers of massive big box retailer Wal-Mart are forced to navigate such cavernous stores—108,000 sq. ft. on average—that finding specific products can be difficult. This frustrating in-store experience can drive customers online to make purchases, finding exactly what they need and much faster than roaming through store aisles. To combat this, Wal-Mart added an in-store mode to its smartphone app which helps customers locate aisles for the items on their shopping list. They’ve also debuted Wal-Mart Express stores, which are significantly smaller at just 12,000 to 15,000 square feet.
Consider employees your biggest asset. Employees and the help they offer are the backbone of brick-and-mortar stores. Knowledgeable and friendly staff members create customer loyalty and keep shoppers coming back for the experience they can’t receive online by clicking a button and adding an item to their virtual shopping cart. Wegmans, a supermarket chain with a loyal, cult-like following, counts on a high-quality workforce to extend its brand to customers. Wegmans invests heavily in its employees, even sending hundreds of staffers on trips around the world to become experts in their products. With dry goods becoming more readily available online, grocery stores can stave off showrooming by taking a page out of the Wegmans playbook.
Live in beta: test, be nimble. Before building a complex system, you need to build a prototype first. At Continuum, we call this “failing fast.” If you design a 10,000-sq.-ft. mock-up of a hotel lobby, you make the intangible tangible, saving time and money before you build the real thing. Continuum regularly does this with Sprint, dropping life-size prototypes into a test store so consumers can “kick the tires” of an idea.
Execute as an organization. It takes an entire organization to truly innovate a service, not just the folks sitting in the c-suite. Involve representatives from every group, particularly those who interact directly with customers. With the international bank BBVA, Continuum brought branch managers together with executives and IT to create a seamless user-centered banking experience.
Specialty and big-box stores alike should take a cue from mom and pop shops by creating in-store experiences that add value and keep consumers coming back in for more. Online retailers can compete on price but they can’t compete on a human-centered level. Stores that innovate around the customer experience will win out in the long run.
Craig LaRosa is a principal at Continuum, a global design and innovation consultancy. He can be reached at [email protected].