Dixons-Carphone: Fingers crossed or uncrossed?

The morning after, opinion seems divided on whether Dixons-Carphone is a marriage made in heaven, or a countdown to divorce...

The issue revolves around a definition of show-rooming. In other words, is show-rooming a means of learning to buy by touching, or simply a way of accessing advice?

Historically, a shopper wanting comprehensive advice on anything more than operating the on/off button in Dixons has allegedly been left wanting… Indepth advice on any gadget is now more comprehensively, objectively and effectively accessed via the internet.

In the same way, category context i.e. a fully comprehensive range of products from which to focus shopper-choice is physically difficult to provide at store level, compared with browsing Amazon.

However, if the function of ‘gadgets’ stores is now intended to provide an opportunity to ‘buy’ by touch, then it is vital for a retailer to provide a seamless wifi instore opportunity for shoppers to complete their online product assessment in the aisle, and reduce prices to a point that makes the switch to online purchase less attractive…or provide an online facility better than Amazon…

Even if the shopper can be brought to this point without leaving the store (to await the delivery now due from Amazon?), Dixons-Carphone will require highly skilled floor-staff to then gently facilitate the completion of the purchase, without the anticipated tussle ref warranties…

All told, NAMs need strong customers and probably have high hopes of a successful merger, fingers crossed….

However, given the multichannel hurdles involved and their real-world experience, NAMs may decide to invest in alternative options, fingers uncrossed…

Closing the deal in the showroom

Given the massive advantage of having potential mobile-consumers actually in the store, obviously in the market, albeit showrooming on price, it seems a no-brainer that conversion of the visits into a sale can be more productive than closing down the instore wifi and driving the customer further online…

Latest thinking indicates that many potential purchasers want immediacy of access to the product, advice and real-world assurance of the wisdom of the purchase at a price that is not too far out of line with available alternatives.

In ‘olden days’, this would have been more than an opportunity for an instore salesman to close a sale. Nowadays we are supported by a wealth of consumer-shopper insights to make it that much easier…

If your business is about helping the offline retailer to optimise mobile-driven sales in the aisle, then latest research (September 2013) on ‘Showrooming and the Rise of the Mobile-Assisted Shopper’ by the Columbia Business School will help.

The research profiles and explores the five types of mobile shopper, but even more interestingly, reveals why some consumers prefer to shop offline…

This 35 page report will tell you all you need to know, but if you simply need some key insights, then see the Econsultancy site where their summaries of the findings, and interviews with the CBS authors can take the busy NAM a long way forward.

Mobile-assistance may have made the buying a little more complicated,  but deep down, selling is still about needs-based-persuasion…

Stores charging shoppers a 'showrooming' fee

Reports of stores charging* shoppers up to $25 to TRY ON clothes in a backlash against the time-wasting trend for 'showrooming', raises some issues that might respond to some creative thinking tools:

Suppose a NAM ran the store?
This creative leap hopefully removes all the prejudice relating to 'how we have always done it' and takes a fresh view, hopefully from outside the business. A NAM in charge would switch the emphasis from selling the goods to helping people buy..., taking into account the existence of competition from a shopper's perspective.

Given that most shoppers already think that online provides a cheaper alternative, a NAM would see the danger of simply adding to the cost of reality shopping, making the price difference even greater. Instead, the NAM-retailer would perhaps explore options re absorbing the additional cost of 'try-ons' by linking the purchase to the shop's online facility, and failing that, a payment from the supplier.  If the same product were  available via alternative online retailers, then an introduction-fee arrangement could be agreed, perhaps in return for reciprocal direction of online shoppers to the showrooming facility, thereby converting a 'dithering shopper' into a sale, to the benefit of all..?

With the NAM's experience of the upfront effort and advantages of a long term relationship with the customer vs. a transactional sale, the potential lifetime value of the shopper would be automatically factored into the instore-encounter, at operating level, one-to-one, and not left at mission-statement level....

Showroom owners are right in counting the additional costs and potential wastage of a 'try-on' customer, but they miss a trick in not seeing the total value of having a real person appear in the aisle, already in the market for a purchase, ideally with the wherewithall (money) and highly susceptible to the personal conversion-skills an online provider can only dream about..

A NAM would not have to be told twice... 
[ For NAMs that need reminding, we are always available to help :) ]

* Press article here

Argos squares up for Amazon battle

With like-for-like sales rising by 5.2% - its best performance since 2006 - in the final quarter of its financial year, coupled with a better than expected profit forecast (results due Wednesday 1st May) of £90m, Argos may be on the way back...

However, Argos-watching NAMs may feel that this recovery may be more a reflection of the demise of Jessops and Comet, than improvements in state-of-art retailing expertise...

According to a report in The Telegraph, Argos are planning  to spend £100m in each of the next three years to put the retailer in shape to battle with Amazon by converting its 700 stores into 100 “showrooms” and 600 click & collect sites, and providing advice from customers assistants.  .

The real issue has to be Argos ability to compete on an equal footing with Amazon and increasingly Tesco, a daunting prospect given their head-start in offering a combination of speed, (1-click) service, multi-channel access, pricing, and increasingly click & collect.

Whilst Argos' commitment to the new show-rooming initiative, combined hopefully with high grade store advisors and efficient click & collect, could offer an initial advantage, anything less than state-of-art performance will result in Argos having to fall back on price and range in attempting to grow sales at the expense of two of the leading players in the market.

However, the fundamental issue for Argos and its suppliers has to be its emphasis upon private label, planning to double its current 15% of sales to a third by 2018, in categories where retailer brands are not an obvious choice.

Given that much of Argos success will depend upon brands' collaboration, they may find that supplier NAMs may prefer to work in the heat of the kitchen with Tesco and Amazon, a place where consumers actually come to buy brands...  

Converting showrooming into buying instore - a proactive role for brands and retailers?

Among those who showroom, two thirds use their phone whilst doing so, providing a major opportunity for brands to interact with consumers via mobile and turn browsers into buyers, at point-of-sale…

TNS’s latest annual Mobile Life study, based on responses from 38,000 people in 43 countries, shows that whilst showrooming is a very real threat, mobile can offer a solution to brands in minimising this risk. 

The study also shows that people are open to engaging with brands whilst in-store, with more than one fifth of smartphone owners keen to receive mobile coupons whilst shopping and a similar proportion interested in apps that help them navigate the store they are in, as they respond to the biggest drivers for showrooming:  reassurance on price and reassurance on suitability....

However, the key for suppliers and retailers is to resist the temptation to alienate via instore information-saturation, whether physical or online... Converting such potential ‘interruption-marketing’ into ‘permission-marketing’ can be achieved by clear announcements – physical signs, audio and online- that free wifi is available to facilitate online comparison, along with e-advice from both the stores site and brand-owners, all accessible from easy-links at point-of-sale, for those that choose to use the facilities….

In other words, retailers need to be encouraged to optimise this physical encounter with a showrooming shopper by getting their consumer-engagement right, making it easier, more convenient and worth a small premium for the potential purchaser to complete the process at that point, rather than giving the almost-completed sale to an online competitor, for a few pennies less…

Meanwhile, brand owners can help by attempting to measure the maximum price-difference that will just about prevent the showrooming shopper from going elsewhere to complete the purchase

Getting it right will benefit all parties…
 

Au shop charges $5 'just looking' fee

                                                                                               pic: Reddit Barrett Fox
In a bid to combat show-rooming, a speciality food shop in Brisbane allegedly charges shoppers* Au$5 per visit, deductable from a purchase, or non-refundable if 'just looking'...

Apart from being a real test of retailer pulling power, this move raises the issue of how retailers and their suppliers can satisfy an obvious consumer need to 'touch the product' before buying, without compromising retail pricing.

In categories such as toys, consumer electronics but also speciality food and drinks, it obviously benefits the brand if consumers are given the opportunity to visit a specialist shop to experience the product and seek advice before making a purchase. However, the resulting on-cost usually makes it impossible for the retailer to compete with online prices for the same brand.

More intensive branch calling and support can obviously increase the efficiency of a specialist retailer. However, given the relatively low turnover of typical specialist outlets, it is usually not possible for a supplier to break-even via orders taken at store level.

A possible solution for brand owners could be to treat the specialist shop experience as an extension of the marketing process, and fund it appropriately. 

In other words, given that any support at point-of-sale can make ATL advertising more productive, then why not write off say 50% of the cost of branch support to the advertising budget? This additional funding could be used to cover part of the cost of calling and also the provision of 'demonstration' allowances for the specialist retailer.

This would allow the supplier to influence the point-of-purchase message to ensure compatibility with overall brand positioning, enhance the consumer-service and allow the retailer to reduce the online price-gap....

When you think about it, a variant on shopper marketing, for the little specialist guys...

* More on the Au initiative

Showroom retailing with a difference - you try on clothes in store, but must buy online...

At the Bonobos Guideshop in Washington, D.C., visitors can sip on beer while they try on clothes for size, but they can only purchase by placing an order on the website. The clothes are then delivered for free within two business days.

Target audience: 
The try-before-you-buy strategy is ideal for men who want to look good but hate shopping. Shoppers who book an appointment at a Guideshop - and there are only two appointments an hour, so the shop is never crowded - are greeted by personal shoppers who hand them a beer and guide them to well-fitted clothes, with the benefits of trying-on outweighing any disadvantages

Inventory economies
From the traditional retailer's point of view, where it's very difficult to get the right sizes for each location, the Bonobos model means nothing is out of stock at a store unless it's out of stock companywide. In other words they are able to deliver the same productivity with a fraction of the typical inventory investment

Other trying-retailers emerging
Online eyewear dealer Warby Parker and Gap's Piperlime Internet label have been opening up physical locations for consumers to try on the goods, and Amazon CEO Jeff Bezos plans to open stores, where customers can check out the Kindle line. It's all an attempt to ride on the $150 billion-a-year in sales success of Apple, whose hands-on-centric stores changed the focus from buying to trying.

Bonobos opened up its first Guideshop in May 2012 in New York and now has locations in Chicago, Boston, San Francisco and D.C.. Five more are planned by the end of the year.

The trying future?
It is easy to dismiss the Bonobos approach as one-off, but think why consumers visit shops -trial-  and then eliminate all the elements that do not directly contribute to that process, allowing retailers to really concentrate on enriching the experience, with no distractions...welcome to the new world of ultimate shopper marketing?

More detail and video here 

Home Delivery charges - a one-way subsidy?

Given that picking, bagging and making a home delivery costs supermarkets up to £20, the £5 charge actually represents a subsidy for the service.

This leaves the retailer with four options:

• Absorb the loss: impossible on current retail margins, especially as the online/physical shop ratio increases?
• Charge more for instore purchases: An increasing an unacceptable burden on those that want/need to shop instore.
• Charge £20 per delivery: a significant turn-off for many online shoppers?
• Or radically increase the minimum order size: a likely mismatch with real shopper need?

Going for scale
Some retailers may see significant scaling up of home deliveries as a possible solution, with the milkman’s street-agreements as a way forward (in the final days of home delivery of milk, dairies agreed solus access to individual streets in order to make individual milkmens’ routes profitable), a practice that might cause issues with the competition authorities, nowadays…

A radical business model?
However, for radical thinkers, the way forward may be via a significant scaling down of store sizes and numbers to better match a shrinking need for physical presence as online increases. With less physical overheads, the average retail margins of 25% could be used to fund home delivery, thereby evolving a new retail model that fully acknowledges a future balance of online and physical retailing.

Otherwise, Amazonian third party online retailers will emerge to take up the space, profitably… 

Virtual shops vs. bricks – some spacial implications?

With a 2012 anticipated 13.2% share of all UK retail trade, and growing at 14%, in a flat-line market, online retail has to represent an unforeseen alternative to ‘real’ retail space. In other words, given the relatively slow reaction of retail space development to market demand, it could be said that UK retail space is already 13.2% over capacity, in that online is taking 13.2% of all retail sales. Moreover this situation will get worse as online grows, especially as online can react ‘instantly’ to market demand, scaling up at relatively little incremental cost…

The real space requirement:
In addition, as shops become more efficient, generating increased revenue per sq.ft., coupled with suppliers’ increased distribution efficiency (smaller quantities delivered more often = increased availability, 100%, zero-defect), adding store-level assortment, matched to local need, it can be seen that even less physical retail space will be required.

Buying time:
This means that major retailers will attempt to diversify even more to buy time, as they slowly readjust to market demand in terms of reducing their physical space i.e. sell off redundant shops, whilst taking some comfort in the growth of their online business, without fully appreciating the cannibalistic element…
Besides which, with Amazon at 50% of all online, no one can rest easy…

Supplier action:

• Suppliers need to reassess brands in terms of their bricks vs. online balance vs. real demand
• Where physical in-store presence is required, the brand will need focused support and performance-based-reward to justify its footprint
• Where shoppers need to handle the brand, suppliers will have to make case for purposeful ‘show-rooming’ and reward the retailer appropriately
• Suppliers need to drive store redundancy via 100% zero-defect supply, and optimise space productivity until a level of retail space is achieved that is more in line with market realities

All else is detail…