Suddenly, Everyone Loves Showrooming

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It was only two years ago that showrooming was viewed as the cause of Best Buy's (NYSE: BBY  )  impending death. Consumers were using the electronics superstore as a means of putting their hands on gadgets before turning around and buying the products from

As the retailer most prominently brought to its knees by the phenomenon, Best Buy was also among the first to embrace it. CEO Hubert Joly said, "Once customers are in our stores, they're ours to lose." The consumer-electronics leader needed to create an in-store experience that would blunt the desire of the customer to buy based on price alone.

How much that hand-holding has worked is still up in the air, but sales last quarter were basically flat, as comps came close to being unchanged compared to being down more than 3% in the year-ago period. And management believes that was largely a result of store resets where they opened up new Samsung Experience and Windows Stores stores-within-a-store concepts. If nothing else, Best Buy's stock has more than tripled this year.

This could explain why other retailers are suddenly gung ho about showrooming. Almost any company that was affected by it now says it is its greatest opportunity.

Wal-Mart (NYSE: WMT  ) sought to minimize the impact of the practice by implementing free ship-to-store delivery services, and offering a mobile app for shoppers to compare its stores' prices with those of competitors, as well as those appearing in its own online storefront. Its same-store sales barely budged 0.1% higher last quarter, but its online sales rocketed 30% higher. 

Similarly, Target (NYSE: TGT  ) has also been aggressively confronting showrooming. It's asked suppliers to design exclusive products for its stores that can't be price-matched, and then adopted a price-matching policy of its own, saying it would meet prices seen on Amazon's site -- first at Christmas, then year-round. It's also started up a ship-to-store program.

And just yesterday, the retailer's multichannel president took to the company's blog to say how showrooming is "also the greatest opportunity for retailers." Like Best Buy, Target has hit on the idea that shoppers need to have a great in-store experience to want to buy there, and like Wal-Mart, it's turning to the digital arena to achieve that, using mobile commerce to seamlessly integrate the two spheres, offering products, price, and personalized offers to seal the deal.

Some retailers seemingly haven't yet woken up to the threat showrooming presents. Earlier this year, mobile analytics specialist Placed studied the mobile shopping habits of some 14,000 Amazon customers, and found that they visited Bed Bath and Beyond, PetSmart, and Toys 'R' Us most often before making a purchase. While the home-furnishings company hasn't publicly addressed the issue, the pet-supplies retailer has at least acknowledged Amazon's presence, particularly after it launched, though it says it hasn't been a factor in its earnings efforts. I'd say that the companies ought to be keeping a closer eye on their e-commerce competition, and investors should monitor their businesses more closely.

Turning the equivalent of lemons into lemonade is an encouraging development for these retailers, but once everyone embraces showrooming, everyone is price-matching, and everyone builds up their mobile storefronts, there's little competitive advantage left. That means, as should always have been the case, personal customer service will determine who gets the sale..

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only the most forward-looking and capable companies will survive, and they'll handsomely reward investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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9/27/2016 11:50 AM
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