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How the Amazon Grinch Stole Retailers’ Christmas

By Rodney Mason, CMO, Parago, rodney.mason@parago.com

In its annual survey of holiday spending trends, Deloitte reports that 46% of consumers plan to do their holiday shopping online. That puts online shopping in the number-one position for the first time in the survey’s history. Deloitte also found that nearly six out of 10 shoppers plan to use self-help technologies in-store when holiday shopping.

In a recent national study, “Dynamic Pricing in a Smartphone World,” Parago found that 58% of all adult smartphone owners engage in showrooming — a stat that falls squarely in line with Deloitte’s survey results. That amounts to roughly 7.5 million U.S. consumers, according to digital analytics firm comScore, and the number is growing. In fact, shopping for the best price is a practice that spans multiple income levels:

  • Consumers with annual household incomes of less than $200,000 name price as the number-one influencer on purchase decision.
  • 76% of shoppers from households earning above $200,000 per year actively showroom.

Brick-and-mortar retailers are attempting to combat showrooming by curtailing price searching via search engines such as Google. By creating custom SKU numbers and developing exclusive brands and items, they hope to keep their products from being matched across retailers through Google search engine queries.

But these tactics are not effective, because the problem isn’t with Google.

Amazon outpaces Google for showrooming
As the 2013 Parago study demonstrates, showrooming is being conducted via Amazon twice as often as it is via the Google search engine. Using Amazon’s Price Check app, shoppers can scan or enter SKU numbers — or even upload pictures of items — to find a product near-match. And as the study shows, the vast majority of consumers will buy the near-match product if it means they can save money.

To salvage their holiday, some major retailers are electing to match Amazon’s prices. This makes sense in the short run, but given Amazon’s razor-thin margins and lower overhead, it’s not a sustainable strategy.

The price-match rebate: a more cost-effective solution
Participants in the showrooming study were asked if they would purchase from a store if that retailer offered a price-match rebate. The majority responded that they would — and that they would shop at and buy from the store more often if this type of rebating were an ongoing, promoted policy.
 
Price-match rebates offer retailers a way to combat showrooming that is more cost-effective than price matching. Plus, they afford the retailer an opportunity to pull the customer back into the store for a subsequent purchase through a bundled offer tied to the rebate reward (e.g., “Bring this Visa prepaid card back to our store in the next week to get another $10 rebate”).
 
So yes, retailers may have some of their holiday jingle stolen by Amazon this season. But with the recent rollout of price-match rebates, there’s hope for a Happy New Year.
 
Rodney Mason is CMO of Parago, a global thought leader and provider of incentives and engagement. Parago delivers over $2 billion in rewards to 50 million people each year for global brands. Its newest study, “Dynamic Pricing in a Smartphone World,” can be found on Parago.com/contact-us/showroomingstudy.Mason can be followed on Twitter at Twitter.com/rodmoose  and contacted at rodney.mason@parago.com.


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