Showrooming & the Price of Keeping Buyers In-Store

Authors: J. Patrick Monteleone, Ph.D., Director, Research Jesse Wolferseberger, Director, Consumer Insights August 2012

0%

2.5%

5.0%
Percent Discount Online % Buy In Store % Buy Online

Showrooming and The Price of Keeping Buyers In-Store

The rise of smartphone usage has fundamentally changed the way people behave. From the way people socialize to the way information is derived, the mobile revolution has had a profound impact. A decade ago, consumers began to use the Internet as the initial step in a purchase path that often times ended up in a brick and mortar store. Now, the Web has changed the way we shop again. Nearly 50% of shoppers are using mobile devices in-store to inform a decision to walk out the door and complete their intended purchase online. Showrooming is the modern trend in shopper behavior where customers go to a brick-and-mortar retail location, make a decision on what item to buy, and instead of heading to the check-out aisle, they use a mobile device to find a better price online where they ultimately make their purchase.

Figure A In-Store Shopping and Consumers Using Mobile

Figure B

Im Hav
80%

% Purchasing In-store

70% 60% 50% 40% 30% 20% 10%

56.3%

43.7%

Use mobile to shop in-store Do not use mobile to shop in-store

Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

0% 0

Source: Stu Keeping Bu

Figure C Impact of Online Cost Savings ($) On In-Store Purchases

% Purchasing In-store

Figure D

P Showr

GroupM Next conducted research to take a close look at showrooming, its influencing factors, and 80% identify the tipping point when the difference between an in-store and online price is large enough 70% to lure shoppers out of stores.
60% 50% 40% 30% 20%

Se

To help brands better understand the showrooming effect and take smarter action, our research also identified the following:
10% How much of a discount does it take to pass over immediate product availability?

Media

0% How many purchasers leave for 5% off? How about 10%? How many$20 walk for pennies? will $40 $0 $60 $80

98% s

Discount Offered likely What demographic and behavioral flags might identify a shopper who is moreOnline to stay in

55%

the store vs. leave?

Is there a media opportunity to encourage shoppers to behave in a desired manner, be it stay

in-store or depart?

Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

11%

Source: Stu Keeping Bu

Showrooming & the Price of Keeping Buyers In-Store August 2012

% Buy Showrooming Survey FindingsIn Store 2.5% 5.0% Percent Discount Online

30% 20% 10% 0%

0%

2.5%

5.0%
Percent Discount Online % Buy Online

10.0% 10.0%

Our research revealed that Buy In Store % while customers would % Buy Online Figure A rather have the product immediately, finding only

Figure B Impact Online Discounts Have on In-Store Purchases

% Purchasing In-store

In-Store Shopping and Figure aFigure A small price difference elsewhere using a mobile B
device is enough to entice them to leave the store and buy online.

Consumers Using Mobile

In-Store Shopping and Consumers Using Mobile

80% Impact Online Discounts 70% Have on In-Store Purchases 60% 50% 40% 30% 20% 10% 0% 0% 5% 10% 15% 20%

56.3% price, 45% of customers say they would leave the store to 60%
50% buy online. When the discount increases to 5% off, 60% 43.7%

56.3% of customers say they would leave. At a 20% discount

in-store.
Use mobile to shop in-store Do not use mobile to shop in-store

% Purchasing In-store

When the online price is just 2.5% lower than the in-store 70% 43.7%

80%

40% 30% 10%

level, only a small minority of shoppers (13%) will stay 20%

Of the products in the survey,GroupM Next; August, 2012 Keeping Buyers to shop consumers considered Do not use mobile In-Store; in-store head-phones (the top-most point at each discount
Source: Study Showrooming & The Price of

UseSource: Study Showrooming & The Price of mobile to shop in-store

Discount Offered Online 0% 0% Source: Study Showrooming & 20%Price of 5% 10% 15% The
Keeping Buyers In-Store; GroupM Next; August, 2012 Discount Offered Online

Figure C level in Buyers In-Store; GroupM Next; August, 2012 products. While Figure D nothing in the language of the there was Keeping Figure B) differently than the other Keeping Buyers In-Store; GroupM Next; August, 2012
question to suggest it, the surveyed appeared to assign Profile of the Marginal Figure D Showroomer Brands Can Target Figure C Impact of Online Cost Savings ($) an implied urgency with headphones. It took a larger On In-Store Purchases Sensitive to the discount for shoppers to leave pricing, but can be buying Profile of the Marginalstore when 80% Impact of Online Cost Savings ($) influenced to stay in-store Showroomer interesting to note, headphones, which, Brands Can Targetwere not the 70% On In-Store Purchases
% Purchasing In-store
80% 60% 50% 40% 30% 20% 10% 0% $0 $20 $40 $60 Sensitive to pricing, but can be cheapest product featured. 90%+ male suggests that This finding influenced to stay in-store

Source: Study Showrooming & The Price of

% Purchasing In-store

70% 60% 50% 40% 30% 20% 10% 0% $0

when a brand can communicate a must-have-now Average age: 52 years old 90%+ can aspect to a purchase, it male combat some aspect of
income: $60,000/annually showrooming. Median 52 years old Average age:

98% some college or higher education Taking Median income: $60,000/annually like the trend the research data a step further,
$80

revealed when looking at the impact onlinemonth 55% buy online once per 98% some college or higher education discounts have on in-store purchases, a similar story emerges $20 $40 $60 $80 Source: Study Showrooming & The Price of 21% once per week when 55% buy online once per month Keeping Offered Online DiscountBuyers In-Store; GroupM Next; August, 2012looking at the data by dollar amount (Figure C).
Discount Offered Online

Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

However, if the difference is than once per week most more than $5.00, 21%11% more once per week customers say they would leave.

11%Keeping than once perGroupM Next; August, 2012 more Buyers In-Store; week

Source: Study Showrooming & The Price of

When a brand can communicate a must-have-now aspect to a purchase, it can combat some aspect of showrooming.
Showrooming & the Price of Keeping Buyers In-Store August 2012

Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

The Showroom Opportunity 2.5%

30% 20% 10% 0%

5.0%
Percent Discount Online

10.0%

% Buy In Store Showrooming is unlikely to be a fad. Consumers have% Buy Online path to purchase to include the shifted their

store as a step, not the final step. This is likely to only increase over time. This research identifies

Figure A Figure B that, if a brick and mortar store can stay within 5% of the online price, nearly half of potential
showroomers will choose to complete their purchase in the store.

In-Store Shopping and Consumers Using Mobile

Impact Online Discounts Have on In-Store Purchases

While pricing is the most powerful aspect in showrooming, there are ways to act based on other
80% 60% explain the customers decision to purchase in-store or buy online, it becomes possible to find the

shopper characteristics that explain the purchase decision. 43.7%

% Purchasing In-store

known variables, including the actual shopper. Using a proprietary logistic regression model to 70%
50% 40% 30% 10% 0% 0% 5% 10% 15% 20%

56.3%

Our modeling determined that the most likely showroomers are: 20%

Younger Primarily female

Use mobile to shop in-store Do not use frequently Make online purchases mobile to shop in-store
Keeping Buyers In-Store; GroupM Next; August, 2012

Discount Offered Online

Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

Have a Source: Study Showrooming & The Price of lower income

When those variables are considered together, the Figure C resulting profile describes someone who cares

Figure D Profile of the Marginal Showroomer Brands Can Target

Sensitive to pricing, but can be influenced to stay in-store

Impact of Online Cost Savings it almost exclusively about price. Strategically, ($)may
be possible to own the mobile experience for this
% Purchasing In-store

On In-Store Purchases

audience by ensuring that the likely sources, such as

70%

80%

mobile search, 60% Google Shopping or comparison sites,

50% have consistent advertising that speaks to important 40% aspects, such as reviews and price comparisons. 30% 20%

90%+ male
Average age: 52 years old Median income: $60,000/annually

About 10% of purchasers surveyed chose to complete 10% the purchase in-store, no matter the price discount 0% offered. This is encouraging for physical retailers as there is a core customer base that appears unlikely to ever showroom. The key for marketers is to identify the Keeping Buyers In-Store; GroupM Next; August, 2012 next 10% the group of customers that are sensitive to price, but can be swayed to stay in-store. Using the model, the group of marginal showroomers has the characteristics profiled in Figure D.
Source: Study Showrooming & The Price of

98% some college or higher education 55% buy online once per month 21% once per week 11% more than once per week
Source: Study Showrooming & The Price of Keeping Buyers In-Store; GroupM Next; August, 2012

$0

$20

$40

$60

$80

Discount Offered Online

Showrooming & the Price of Keeping Buyers In-Store August 2012

Understanding this profile may enable brands to target through existing loyalty programs, as well as through online media buys. Using a retargeting strategy that incorporates messaging designed to give these shoppers the reason they seek to stay in-store before they arrive may prove beneficial. Additionally, showroomers exhibit behavioral cues. The model identified customers who read reviews on a mobile device and those who compare in-store prices are more likely to showroom and leave the store. It shows that shoppers who are price shopping in a store are one step away from pulling out a mobile device and checking online prices. The model also revealed that associates can be influential, as customers who interact with an associate are 12.5% more likely to purchase in-store. Several retailers are taking actions that not only enhance customer experience, but also may serve to alter the current behavior of customers. Target is offering more in-store exclusive items. Wal-Mart is giving customers easy access to coupons and lower prices on its mobile application, encouraging shoppers to showroom in a controlled way. Best Buy is starting to explore smaller stores, which are focused more on small items, such as tablets and e-readers, and less on large items, such as televisions. Macys and Nordstrom are integrating their online and offline inventories, so customers can make sure a store has their item in stock, and if not, have it shipped from a different location. Showrooming is a label for a massive consumer behavior shift brought about by the ease of access to information on a mobile device. Brands that sit on either side, be it as the physical store or the online merchant, have multiple opportunities with this consumer change. Understanding the level at which someone is motivated to leave a store may help with future messaging strategies, not only in-store, but also online. To date, most brands have approached mobile search buys as an extension of the desktop purchase. Data from this research may suggest an opportunity to own the review and price query load in an effort to capitalize on those standing in the aisle looking for a slightly better deal. As Google rolls out a paid Shopping product, it becomes increasingly important for brands to be present, and aware of both the new landscape of competitors and implications for its online and in-store opportunities. The store was once the final destination for purchase by consumers. Now, it is becoming another step along the journey. With this understanding, brands need to think more about how showrooming can be influenced by a brand to navigate would-be buyers to a checkout location, be it in the store or online.

Methodology
GroupM Next, in conjunction with Survey Sampling International (SSI), surveyed 1,000 U.S. shoppers, asking about 10 products in multiple retail categories at varying price points. Shoppers surveyed were given hypothetical showrooming scenarios in which they could purchase a given product and own it immediately, or they could take a discounted price, leave the store and have the product shipped. Showrooming and the Price of Keeping Buyers In-Store August 2012

GroupM Next is the forward-looking, innovation unit of GroupM, the worlds largest global media investment management group that is the parent company to WPP media service agencies Maxus, MEC, MediaCom and Mindshare, as well as Catalyst Online and Xaxis. Together with GroupM agencies, GroupM Next focuses on the curation and application of insight-focused solutions across online, social, mobile and addressable channels. Through thought leadership, technology, research and education, GroupM Next delivers data-driven, actionable insights and a clear path to action to help GroupM agencies and their clients harness the right opportunities made possible in the digital technology and new media industry environments with speed and relevance. Access our work and discover our perspective at www.groupmnext.com. Contact us with questions or comments: cindy.spellman@groupm.com

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