How To Defeat Showrooming
Oh God, I'm so ashamed of myself. I just showroomed.
I couldn't help it. I've been looking for a new laptop. I had a few ideas. I went into a local computer store and asked questions. I went to two big box retailers and tested out a few models. And then when I narrowed it down...I succumbed to temptation. I went back home and bought the laptop online because it was a few dollars cheaper. I feel so, so dirty. And sadly this is not the first time I've done this despicable act.
Well, maybe it's not so despicable. Look, we all showroom, don't we? Admit it. It's not a nice thing to do to a brick and mortar retailer. But money is money and value is value. And, like many consumers, showrooming is a very legitimate shopping strategy. For the past few years retailers have struggled against this trend. A Gallup poll as recent as last November found that brick-and-mortar stores may be losing nearly one customer in 10 to showrooming. Some larger retailers have fallen into financial problems because of the practice. And new technologies, like Amazon's recently released Fire Phone, encourages this buying trend.
So what's a retailer, big or small, to do? How can they fight back? Some are trying "reverse showrooming" where they encourage buyers to evaluate products on line and then come into the stores to pick them up, rather than wait for a delivery. Others are reducing prices. A few retailers are cutting back on retail space altogether. These tactics have some impact. But of all the retailers I've seen, there is one that I think has an answer to the problem. It's Sam's Club.
Full disclosure: Sam's Club is a client of my company, but they did not compensate me to write this column. I'm writing it because their model is something that retailers, particularly small retailers, should examine closely. Sam's Club doesn't just sell products. It sells memberships first. And being a member of something, particularly if you're paid for that membership, brings benefits for the consumer, retailer and small business owner. It's the perfect antidote to the showrooming problem, isn't it?
Seong Ohm, who's the Senior VP of Merchandise Business Services at Sam's Club, says this is not the company's primary goal. "Our duty as a membership club is not to reduce showrooming, but to provide our members with exclusive access to differentiated merchandise and relevant services at a tremendous value. That will drive member loyalty and make Sam's Club a top choice in our members' consideration set every time they shop."
Sam's Club asks its members to pay an annual fee (anywhere between $45-$100 per year) and for that they are entitled to certain benefits--namely discounted products and services. The company has grown to about 47 million members. And with those large numbers comes large purchasing power. Sam's Club not only provides merchandise for sale, but also offers steep discounts on everything from travel to payment processing services for small business owners. And the club plans to add more services over the next few years in the areas of healthcare, finance, technology, marketing, payroll and legal. In addition, the company partners with other well known brands like Olive Garden, Apple, Eddie Bauer and The Children's Place to bring those products and services to their members as well.
Now think about your business. Should you consider a "membership" model as well?
Can you partner with other local businesses to create a service that's so valuable that customers would pay an annual fee to be part of it? Would I pay to be a member of a local restaurant "club" that has twenty or so eateries participating, all offering me discounts and other perks for my annual fee? Or a similar club of small, local retailers that have banded together to combine their products and services into a membership program? Or a club of service providers, such as accountants, lawyers, doctors, etc. who share facilities, offer added consultations and a more personalized service to those members who are part of their club? Is this worth fifty bucks a year for me? A hundred? Can you make it worth that amount? And would it be so worthwhile that I would be dis-incentivized from showrooming because I'm getting more value from my membership, or feel more loyalty to the club? Isn't everything a service, including retail? Don't we all want to belong to a community?
"We want to be the most valuable membership organization in the world and creating loyalty is a key component to achieving this goal," Ohm told me recently. "We do believe that superior value combined with the right assortment of merchandise and services is key to member loyalty." Sam's Club is building on that model and demonstrating that customer loyalty can overcome the challenge of showrooming. Maybe it's time for small retailers, small service providers...even your business, to do the same.
GENE MARKS | Columnist | Owner, Marks Group
Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.