Historians may one day point to December 10, 2011 as the official date the showrooming wars began. That’s when Amazon announced that users of its Price Check mobile app would receive an additional 5% discount when they scanned a barcode from a product spotted in a bricks-and-mortar retailer and bought it from Amazon. It was a bold shot across the bow of traditional retailers.
And a year on, showrooming is becoming increasingly prevalent in grocery. Microsoft’s research of consumer shopping habits in US, Brazil, Korea, Japan and the UK showed that 71% of smartphone users have used their mobile phone to compare grocery prices.
Once, shoppers had to take pricing promises on faith. Today, it takes about 30 seconds on an iPhone for a 25-year-old to figure out that your 52-inch flat-screen is 14% cheaper on Amazon.
No retailer can continue to drive prices down so they are consistently lower than the competition. And an EDLP retailer that loses on price, simply loses.
We do not have to look too far to see the evidence of the impact of this trend. In the US, Best Buy and Target are both EDLP-led leaders in their respective categories who, for the critical Christmas trading period this year, have pledged to match online prices. However, this additional pressure on margins is untenable.
So if EDLP (as a sole marketing strategy) is dead, where does that leave retailers? Price remains the driving factor - it’s simply that we have entered into a retail environment of ‘price +’.
John Lewis is an example where exceptional customer service and tangible benefits make customers question whether a lower online price alone is worth it. For example, that 52-inch flat-screen might be 14% cheaper online - but a free five-year warranty and no-quibble return policy would make a consumer question the value of that saving.
Other retailers use loyalty currencies as a lever to influence customer behaviour and add value.
‘Price +’ is about creating added value that shifts the focus to a service, experience and benefits-led proposition. Retailers whose key focus has been price-only are suffering. Showrooming has signalled their death knell.