10 Retailers Most Vulnerable to 'Showrooming'

US News

A lot of shoppers have gone to an electronics store to check out the goods, then used their smartphone to order the product they want online. That habit, known as "showrooming," is now spreading to other types of retail outlets, threatening even more turmoil in one of the nation's most turbulent industries.

[READ: Why Apple and Amazon Win at Retail and Best Buy, J.C. Penney, and Kmart Lose]

Best Buy, the big electronics chain, is the most prominent victim of the showrooming trend, with profits falling even as the economy gains strength. The biggest beneficiary has been online giant Amazon, which now has a mobile app that makes it easy to type a product into your smartphone while browsing in a store, to see if Amazon offers a lower price. Best Buy, Target and other retailers have started to fight back by offering to match any price found online.

But online merchants may have the momentum in this battle, because some brick-and-mortar retailers have turned off shoppers with pricing gimmicks and subpar service. A recent study by research firm Gartner found that 60 percent of shoppers practice showrooming, and the majority of those people end up buying products someplace other than the store where they first go to shop. In some cases, shoppers choose to shop online even when they're in a store that offers to match the price, which means they're willing to wait a couple of days for the product to arrive by mail instead of taking it home right away.

Best Buy isn't the only vulnerable retailer at the mall. Another study, by a new research outlet called Placed, analyzed the shopping behavior of showroomers and identified the stores where they're most likely to shop. Here are the 10 chains showroomers frequent the most, with the percentages representing how much more likely a showroomer is to visit each chain, compared with an average customer:

--Bed Bath and Beyond: 29 percent.

--Petsmart: 25 percent

--Toys 'R Us: 21 percent

--Best Buy: 20 percent

--Sears: 19 percent

--Barnes & Noble: 18 percent

--Kohl's: 17 percent

--Target: 15 percent

--Costco: 14 percent

--J.C. Penney: 14 percent

The numbers don't necessarily mean each chain will lose sales to online competitors, since showroomers could still choose to make their purchase at the physical store. And some stores seem to have less to worry about than others. More Amazon customers shop at Wal-Mart than at any other chain, for instance, but Wal-Mart didn't show up as a showrooming target in the Placed study, perhaps because it's already known for low prices.

[READ: The Outlook Darkens for the Barnes & Noble Nook]

Some analysts, in fact, think showrooming gives retailers more opportunities to win over new customers, since they've already shown up at the store; all that's left is to close the sale.

Closing the sale, however, is where some traditional retailers fall short. Sometimes, they simply don't have the products on hand that shoppers want to buy, which has become trickier since online competitors are able to offer nearly endless variety without having to devote valuable retail space to every available model. So shoppers looking on Amazon might find many variants of a product, while the store may only stock one or two.

Many shoppers also seem to distrust the physical retailer, which may be the biggest reason customers make a purchase someplace else. "Some retailers have just not been aware of consumers' evolutionary process," says Bob Hetu of Gartner. "If I have to prove that my price is lower, that doesn't instill trust."

Amazon, meanwhile, has been gaining trust, recently beating out Apple to win the top spot in the Harris Interactive annual survey of corporate reputations. And Amazon doesn't typically offer price guarantees at all. It does, however, have a fanatical focus on customer service and solving problems, which is a notable weak spot for some other retailers.

Here's one more worrisome sign for traditional retailers: Shoppers between 18 and 29 have a "foundational belief" that online retailers have better pricing, according to the Gartner report. That means they're likely to default to online shopping, with traditional retailers having to prove they can compete. That's a complete flip from a decade ago, when Amazon and its online kin had to prove themselves worthy of customer loyalty.

[PHOTOS: Rosa Parks Statue Unveiled at Capitol]

Since showrooming has proven to be an effective way to shop for electronics, it's likely to become mainstream in the market for household items, small appliances, clothing and just about anything else that's worth shopping around for. The mall still serves an important purpose, it just may not need as many cash registers as it used to.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.



More From US News & World Report

Rates

View Comments