“Showrooming” Customers Good for Amazon (NASD: AMZN), Bad for Best Buy (NYSE: BBY)
Despite popular opinion, it appears that online retail giant Amazon (NASD: AMZN) already has showrooms in many customers mind – unfortunately for the showrooms, they are Target (NYSE: TGT), Best Buy (NYSE: BBY), and Wal-Mart (NYSE: WMT).
Price conscious customers are displaying a new behavior known as “Showrooming”, where shoppers who walk around stores like Walmart, Target and Best Buy, and then use their mobile phones to compare prices at other stores or online at Amazon. The trend is becoming so popular in fact that the advertising industry is adapting and taking notice. Companies are now paying to advertise on mobile phones that they know — through geolocation — are in or near big box stores in hopes of tempting them toward offers from rivals.
The results of recent surveys show that Amazon is not an equal threat to all stores: Bed Bath & Beyond is most likely to suffer from its own in-store customers looking up cheaper stuff on Amazon. Best Buy also suffers disproportionately. “Showroomers that purchase on Amazon are 20% more likely to visit Best Buy and 15% more likely to visit Target than average, but several other retailers face an even greater risk,” Placed says. Although Walmart carries a low risk of showrooming — perhaps because customers believe they’re already looking at the lowest possible prices — it is in fierce competition with Amazon.
This trend surely plays well for Amazon, but poses a major risk to the brick and mortar retailers – particularly Best Buy. Best Buy runs the risk of seeing sales diminish even though foot traffic remains high. As customers are in their stores, seeing, touching, and feeling the device, then choosing to buy the good from Amazon on their smart phone while in their car, Best Buy suffers from a double edge. They lose a sale to a competitor, while serving as their proxy store in the process. The consumer will surely benefit by the improvement in price information they all enjoy today – the days of visiting multiple stores to price shop are now long gone, that can be accomplished quickly and easily, with virtually no cost today. If a customer doesn’t desperately need the product today, order from Amazon or other online retailers can reap significant savings, while also saving time. The brick and mortar stores will have to find a way to adapt and compete in the changing landscape, or risk going the way of the dinosaur.