Be Experiential: Three Ways to Beat Showrooming
By Ken Nisch, [email protected]
Showrooming, much like many other perceived threats in retail must be seen as an opportunity, not as a negative. Arguably, the challenges that showrooming has created for retailers are relative to price transparency, finding a place and role within the consumer’s mind that will be superior to the online retailer (remembering that many online retailers can offer broader assortments, 24/7 convenience, and shopping accessibility). And with the peak shopping time for most online retailers actually during office hours – often immediately after lunch; this is something that the brick-and-mortar retailer unfortunately can’t compete with, and reminds us of the old adage, “It is better to join them than to fight them.”
With the tools that they currently have in hand, particularly through mobile, it is inevitable that the consumers will not only find ways today, but will increasingly find opportunities to buy in the future – and at the best price. There will always be consumers who only measure price when looking at products; particularly branded products that are universal, easy to compare-and-contrast based on model number or type, and where the brand value of products being purchased in many cases is more essential than the place where the products are purchased. This is particularly important in the categories that include consumer electronics, books, cosmetics, and branded fashion.
Yet in these same categories, the consumer’s need for trial, knowledge and engagement, as well their need for social contact and context during the purchase process, make these categories the exact ones that can be most influenced by an effective retail experience.
1. Embrace the Reality
The first point of the basics is “Embrace the Reality.” The hours and energy that corporate resources spend to argue “denial” are understandable, yet that is the most dangerous reaction to showrooming. The thoughts around “creating imaginary force fields” that defeat the consumer’s access to online information, bait and switch strategies, and even activities to create confusion around model numbers, specifications, etc. are all shortsighted. Not only will they not effectively prevent showrooming, but they will erode the consumer’s confidence and trust in the retailer who now will be seen as “the enemy” versus the friend.
In Embracing the reality and looking toward ways in which the retailer can enrich and reinforce their relationship with the consumer through the showroom activity is critical. Interestingly enough, research has shown that consumers who have had effective and helpful showrooming activities are highly likely to buy from the retailer, and will buy more by consolidating both their online and in-store activities with the retailer. Consumers also report more favorably on the value that the progressive retailer has taken though their social network.
There is a second adage that fits this embrace, “Keep your friends close and your enemies closer.” The embracing of showrooming hits this issue head on by making it into an opportunity versus a challenge.
The next point to consider in combating showrooming is to think less siloed and more omni-channel. Omnichannel is a term that is gaining rapid acceptance among the retail community who has found their best consumers from a life-purchase perspective. They tend to be the customer who not only doesn’t simply shop one channel or the other, but who shops across a rich variety of channels at different occasions, and does so across the widest variety of categories and products when finding the right Omni-channel partner.
In many cases the retailer is the biggest barrier to their own omni-channel retailing, through archaic commission and credit protocols that deprive one channel or another of credit for making the sale. They often jealously guard their consumer information by channel, versus creating a rich and multi-dimensional relationship with the consumer through omni-channel thinking. This impacts the store environment in many ways. Rather than isolating the consumer’s access to online or competitive information can make this a focal point of the retail experience.
This can be accomplished by creating interactive digital elements within product displays via tablet formats. Through training, retailers can also encourage their sales associates to expose the customer to the full breadth of inventory, whether it is actually housed in-store or remotely, as part of their purchase choices. Clearly, the intent should always be to conclude the sale in-store whenever possible, or if the primary channel at the time is online; but to do so in a way that integrates both opportunities.
One of the big changes in looking at the showrooming concept is focused on order online, and pick up in-store. The store inventory can provide more near-term accessibility to products for last minute purchase; another way to provide further trial and sampling of the product. But most importantly, it typically provides an additional purchase occasion by the consumer who has ordered online, picked up in-store, and now may be exposed to the wide variety of accessories and add-on purchases that will make their online purchase even more satisfying.
One global optical retailer allows consumers to build a virtual tray of eyewear, set an in-store appointment; of course with the store providing additional choices beyond the consumer-defined selections relative to trade up options to expand the purchase potential. Another who specializes in personalized products, provides certain gift enhancements, i.e. wrapping, bags and even PWP’s (purchase-with-purchase) opportunities in-store, where the online purchase and in-store pickup qualifies the consumer for certain special offers at the time of pickup. In both cases the retailer reports significant purchase attachment to this online purchase in-store pickup option.
3. Integrating Mobile Technology
Increasingly retailers are using mobile to expose consumers to new products, social network endorsements of their peers, and entertainment related to available product. Yet in most cases we are not seeing major translation of mobile activity into direct purchase activity such as purchasing with your mobile device.
However, we found that mobile provides huge opportunities for integrating your store experience through in-store connections – like driving location-specific promotional activities based on customer proximity to store locations. Even then, we are not seeing too much of in-store experiences providing activities for customers to engage their social networking. They could provide everything from fitting room trial of fashion products, to in-store QR coding and/or near-field communication using the consumers’ mobile device as the access point.
Retailers might use the information from mobile devices for looking up customer’s previous purchase behavior – to customers Tweeting a photo from the store modeling their favorite new outfit.
Embracing the reality, implementing an omnichannel focus, and integrating mobile technology can help you combat the challenges of consumer showrooming. Put these tools to work for your future store success!
Kenneth Nisch is chairman of JGA, a retail design and brand strategy firm in Southfield, Mich. Nisch applies his knowledge and entrepreneurial insight to create concept and prototype development and brand image positioning. He can be reached at [email protected].
CVS looks ‘solid’ in third quarter
CVS, which posted a solid third quarter across its enterprise, is well-positioned to benefit from the rapidly changing healthcare environment. That was a key message that CVS president and CEO Larry Merlo had for analysts during the company’s third-quarter conference call.
“The healthcare environment is changing rapidly, and there are certainly a number of moving parts from the Patient Protection and Affordable Care Act to the private exchanges. Collectively, we expect changes within this environment to be a net positive for our business in 2014,” Merlo told analysts.
To drive growth and take advantage of the evolving landscape, the pharmacy retailer will participate in coverage expansion in the public exchanges, and also will participate in the private exchange market for both active employees and retirees.
He noted that, as the No. 1 PBM player in the managed Medicaid space, the company also is well-positioned to gain share through Medicaid expansion.
What will this mean for PBM margins? Merlo acknowledged that while it does expect to see some churn in PBM lives and perhaps some margin compression, it expects this to be mitigated by such cost-management tools as narrow networks, its Maintenance Choice offering, etc. The bottom line: The company does not expect a material impact on PBM margins in the “foreseeable future.”
“In addition to tighter pharmacy management tools, we also expect share gains from both market expansion and market churn as an additional lever to help offset PBM margin compression,” Merlo added.
Another boon for CVS Caremark is that its opportunities as it relates to healthcare reform extend beyond just its PBM business.
“Leveraging our retail footprint, we can support health plan marketing initiatives ranging from limited pilot marketing programs to full-scale educational programs. In fact, over the next six months we expect health plans to host more than 6,000 marketing events in more than 1,000 of our stores across 20 states.”
Strong results drive revised 2013 guidance
For the quarter ended Sept. 30, net revenues rose 5.8% to $32 billion compared with the year-ago period.
Net income totaled $1.25 billion, or $1.02 per share, compared with $1 billion, or 79 cents per share, in the year-ago period. Excluding a gain from a legal settlement, adjusted earnings per share rose 23.9% to $1.05.
Revenues in its pharmacy services segment rose 7.8% to $19.5 billion in the quarter. The 2014 selling season proved “strong” for its PBM business as it has completed 75% of renewals to date and has a 96% retention rate, Merlo told analysts. Net new business totaled about $1.8 billion.
Within specialty pharmacy, revenues rose about 22% year over year. Driving the growth: drug price inflation, utilization, new product launches and new PBM clients.
It is interesting to note that, to further differentiate its offerings, the company is leveraging its brick-and-mortar stores to pilot a specialty pharmacy delivery offering.
“What we’ve been able to do is take all of our specialty capabilities and connect to our retail stores. So, now members that want to get access to specialty medications can go in any one of our 7,400 stores as we roll this program out next year,” Jon Roberts, EVP and president of CVS Caremark Pharmacy Services, told analysts during the call. “We will leverage all of the back-end clinical capabilities, the billing capabilities, the fulfillment capabilities and then we will be able to deliver that prescription either to the member’s home — like what happens today with specialty pharmacy — or deliver it to their local CVS/pharmacy. Similar to Maintenance Choice, half of the people want to pick up their specialty prescription in their CVS local store and the other half want it mailed to their home.”
Meanwhile, the retail business posted a revenue increase of 5% to $16.3 billion. Same-store sales rose 3.6%. Pharmacy same-store sales increased 5.7%, while front-end same-store sales slipped 1% due to softer foot traffic. The company noted that, despite slower foot traffic, both front-store basket size and front-store margin improved “modestly” during the quarter.
Given the company’s strong operating results to date and its outlook for the remainder of the year, the company has raised and narrowed its earnings guidance for 2013. It now expects adjusted earnings per share to be between $3.94 and $3.97 in 2013. This compares with its prior guidance of $3.90 to $3.96 per share.
“We are pleased with our strong third-quarter results and optimistic about the outlook for this year and next. We see the evolving healthcare environment as an opportunity for growth, and we believe we are very well-positioned to gain market share across the enterprise,” Merlo said.
Lands’ End standardizes free shipping ahead of holidays
Lands’ End will offer free shipping to all customers on purchases more than $50 as part of its standard customer offerings. U.S. customers will also have the option to upgrade to two-day UPS shipping for $5.
"At Lands’ End we are very in tune with our customers and are always listening to their wants, needs and frustrations," said Edgar Huber CEO and president of Lands’ End. "Based on our research, we learned that the cost of shipping is very important to our customers and decided to make the necessary changes to ensure we are providing our customers with the exceptional customer service they have come to expect."
Previously, Lands’ End only offered free shipping on purchases more than $50 as part of yearly promotions, and customers were required to enter a code in order to redeem the discount. The retailer’s e-commerce site has also been updated to simplify the checkout experience. Customers will no longer have to enter a promotion code, and shipping preferences can be easily selected.