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Retailers must respond to "showrooming"

News, 24 January 2012

NEW YORK: Retailers in a variety of categories face an increasing need to respond to "showrooming", or the trend of shoppers researching products on the high-street before purchasing them online.

Target, the discounter, recently sent a message signed by Gregg Steinhafel, its CEO, and Kathee Tesija, its EVP, merchandising, to many suppliers discussing this very matter.

"We understand and appreciate consumers' desire to find the best price, and we are absolutely committed to delivering the differentiated, high-quality merchandise Target is known for at low prices," their message said.

"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."

Target is now boosting spending on its multichannel efforts, working individually with big brand owners to create a unique assortment, and developing membership- and subscription-based internet loyalty schemes providing the most competitive prices.

A study released in December 2011 by the Codex Group, the research firm, also found that 24% of Americans who had bought a book from an ecommerce site in the month prior to the survey first saw it in a bricks and mortar store.

Moreover, 39% of the panel who had acquired a book from Amazon looked at it in a bookstore before doing so, a type of behaviour attributed to new habits such as saving relevant details on a smartphone, and, more broadly, the growing uptake of e-readers.

"The two forces combined are going to put even more pressure on bookstore sales in the new year, unless publishers can do more to support the book retailer just as movie studios have historically done to support the movie theatre," said Peter Hildick-Smith, president of the Codex Group.

Adrianne Shapira, a retail analyst at Goldman Sachs, suggested rising web usage, particularly for shopping was an unmistakably transformational process. "That is where we're heading," she said. "You can try and dance around it, but it's a fact."

Sucharita Mulpuru, an analyst at Forrester, the insights provider, added that Amazon is able to utilise resources from the profitable parts of its business to drive down prices elsewhere.

"The traditional retailers are still doing business the old way while Amazon has reinvented the model," she said. "Wal-Mart and Target are willing to sell a few things at a loss. Amazon's whole business is a loss leader."

In the UK, Dixons, the electronics retail chain, received a Gold at the 2011 APG Creative Strategy Awards for a campaign encouraging consumers to visit Dixons.co.uk to purchase products that they had first researched in competitors' brick-and-mortar stores.

Data sourced from Wall Street Journal/Warc; additional content by Warc staff