Why Bed Bath And Beyond, PetSmart Should Fear Showrooming More Than Best Buy

It’s no secret that showrooming, when shoppers browse brick-and-mortar stores to check out potential purchases, only to buy them later from online merchants like Amazon at lower prices, has retailers running scared.

Think Best Buy and Target have the most to fear? Think again: It’s Bed Bath & Beyond and PetSmart that should be pushing the panic button.

That’s what the findings of “Aisle to Amazon: How Amazon is Impacting Brick-and-Mortar Retailers,” revealed.

The study was conducted in January by Placed, a location analytics firm, which bills the report as the most comprehensive account of the stores most vulnerable to the effects of showrooming.

It’s based on responses from 14,925 Amazon customers who researched products in stores from nearly one billion U.S. location data points.

A Showrooming ‘Inflection Point’
“The struggle between online and brick-and-mortar has reached a critical inflection point, driven in part by the near ubiquity of smartphones that bring the pricing power of the Internet through every retailer’s front door,” the report says.

“With more shoppers turning their trips to the store into a showrooming experience, offline retailers are feeling the impact of Amazon in their aisles more than ever.”
It’s been widely reported that Best Buy and Target are grappling big time with showrooming.

To counter the impact of losing sales to the practice, both chains made their online price matching programs (launched during the holiday season) permanent this year.
And they have reason to be worried. Showroomers were 20 percent and 15 percent more likely to visit a Best Buy and a Target, respectively, than an average consumer, the study said.

By contrast, the nation’s biggest retailer was considered safer than Best Buy and Target. Indeed, showroomers were 10 percent less likely to visit Wal-Mart — which doesn’t price match Amazon — than Target.

Most Imperiled: Bed Bath & Beyond, Pet Smart and Toys “R” Us
But showrooming poses the biggest threat to Bed Bath & Beyond, followed by PetSmart, then Toys “R” Us, according to Placed’s survey results.
Although the findings might first seem “counter-intuitive,” they make perfect sense, says Susan Lee, who runs the consumer goods and retail practice in North America for Simon-Kucher & Partners, a global consultancy that counts retailers among its clients.

Based on its own study, the consultancy found “the categories with a lower purchase frequency and a higher need to touch, such as toys, sports, hobbies, clothing, furniture, and health and beauty, what we classify as the ‘New Frontier’ … are the next wave of battleground between online and physical stores,” she told Forbes.

In turn, consumers within these categories [sold at Bed Bath & Beyond, PetSmart and Toys “R” Us] are now starting to form their purchase habits between online and physical stores, which explains why retailers that sell these categories are the most susceptible to showrooming.”

Conversely, product categories that reflect less need for shoppers to touch, such as books, entertainment and consumer electronics, are what Simon-Kucher has identified as “Vanguard.”

These product categories, sold at chains such as Best Buy and Sears, which were the fourth and fifth retailers most threatened by showrooming, respectively, but less vulnerable than the home furnishings, pet supply and toy chains, according to the Placed survey.
Best Buy and Sears are “not ranked among the top three [retailers] for showrooming because consumers have already developed their online shopping habits and, therefore, there is less of a need for showrooming,” she said.

However, the retailers might instead be staring down a more troubling fate.
“In the future, traditional stores within vanguard will become marginalized or disappear, resulting in more of a pure online battle within these categories,” Lee said.

Meanwhile, the Placed study also found that showrooming is poised to cut into sales racked up by big spending shoppers at retailers ranging from Costco to off-price chain T.J. Maxx.

The survey found that consumers who shelled out more than $100 in the past three months on Amazon showed a high propensity to visit stores such as warehouse clubs Costco and BJs Wholesale Club, as well as Victoria’s Secret and T.J. Maxx – stores that would not necessarily come to mind as being vulnerable to showrooming.

www.forbes.com