Showrooming -- the practice of price-comparison-shopping online while in a physical store -- has brought some of the biggest brick-and-mortar retailers to their knees. Three big-box merchants, in particular, are at risk of becoming showrooming casualties this holiday season.
In the holiday crosshairs
Nearly half of Black Friday shoppers plan to showroom this holiday season. A recent Placed survey found that consumers who planned to engage in the practice revealed a strong propensity to visit bookstore, shoe, and beauty product retailers on Black Friday. The most at-risk retailers include Barnes & Noble (NYSE:BKS), DSW's (NYSE:DBI) Shoe Warehouse, and Ulta Salon (NASDAQ:ULTA).
Brick-and-mortar stores can't compete with e-retailers on price because they have high fixed costs, like rent. Instead, they must differentiate by providing something online merchants can't. Maybe it's a better shopping experience, unequaled service, or a top-notch loyalty rewards program. Will these retailers do enough to stand out on Black Friday?
Setting themselves apart (or not)
Barnes & Noble is tackling this year's shortened holiday shopping season with an unorthodox approach in this day and age. The bookseller has decided to kick off the season with its "Discovery Friday" one week ahead of Black Friday. Store employees will offer personalized gift recommendations, hoping to provide a unique customer experience. CEO of the B&N Retail Group Mitchell Klipper feels that "Barnes & Noble offers the ultimate holiday shopping experience for customers who enjoy the art of discovery, appreciate the human touch, and recognize that the best recommendations don't come from an algorithm." Regardless of whether B&N's strategy ends up being the perfect equation or a recipe for disaster, you've got to give the bookseller points for creativity.
The same can't be said for DSW or Ulta. DSW's loyalty rewards program includes points on every purchase, double points two times per year, and free shipping on orders of $35 or more. Its premier status members receive extra perks. Participation in Ulta's loyalty rewards program grew to 12 million active members in the second quarter, an increase of 19% compared to the same period last year. While that fact, coupled with the beauty retailer's whopping 72% increase in e-commerce last quarter is impressive, the company isn't doing anything in particular to set itself apart this holiday season. Neither retailer appears to be offering compelling reasons for customers to visit and purchase in-store on Black Friday.
Foolish bottom line
Undoubtedly, e-tailers have changed the competitive landscape. Showrooming is a legitimate problem facing traditional retailers. To effectively compete, big-box merchants must step up their game. Of the three retailers mentioned, Barnes & Noble is the only one going out on a limb this year. It remains to be seen whether Black Friday shoppers will deck its aisles and make in-store purchases or buy from e-retailers instead.