Will “Showrooming” Kill Retail?

"Showrooming," using retail locations as showrooms from which to shop online, makes even the most hardened brick-and-mortar retailer shudder. Retailers cringe when they witness shoppers accessing their smartphones as they peruse the carefully displayed inventory on their shelves, knowing that these items are now listed in recent Google or Amazon search histories, easily accessed later from the comforts of home. Has the victor in the battle for consumer dollars already been declared? Has the physical store become simply a showroom for e-commerce?

These questions are particularly relevant now as we approach the start of the all-important holiday retail sales season. As the Chairman and founder of Gazit-Globe, a company that owns almost 600 shopping centers around the world, I am constantly evaluating the competitive landscape in which we operate.

The result of this type of hybrid shopping does not, however, necessarily result in a lost sale for the brick-and-mortar retailer in favor of the electronic vendor. When looked at more closely, shopper behavior reveals that the majority of smartphone owners use their devices to access relevant information when they are inside brick-and-mortar retailers. Trends indicate that smartphone shoppers are more likely to shop in brick-and-mortar stores than shoppers who do not own smartphone, reflecting both the demographics of this sub-group of shoppers and the advantages of the mobility of their devices; this behavior suggests the blending of alternative retail avenues rather than a division of channels.

So why does a consumer with access to physical “showrooms” and electronic means for easy shopping online still make purchases in a physical store? Is it, perhaps, to fulfill a human need for consumption and the immediate gratification gained by purchasing an item and being able to exit the shop immediately with it in hand? No matter how good a website, how attractive the prices online, or how quick the shipping, e-commerce offers a fundamentally different experience than the physical act of consumption. Nevertheless, the rapid growth of e-commerce is forcing brick-and-mortar retailers to reconsider their traditional model and how they view their relationship with an increasingly diverse consumer base. The role of the physical store itself is changing; it is no longer simply the place to purchase goods but a representation of a retailer’s brand. When consumers can purchase goods online from any location, the ability to draw them to a store lies in offering something beyond merchandise. Location becomes critical to the success of physical retailers, with prime urban locations becoming the shopping and lifestyle destinations of choice. Successful urban shopping centers are more than a place to shop but are natural social and leisure hubs within the communities they serve.

In response to the challenges of e-commerce, traditional retailers have had to adopt new approaches for retaining and gaining market share. To be successful, retailers must develop their own apps and online presence that have the feel and look of their online competitors. Customers expect seamless transitions between online and in-store shopping, and both retailers and landlords need to adopt online methods to enhance a customer’s in-store service and experience, e.g., easy mobile access to product reviews and price comparisons and location-based and user-behavior customized promotions. Furthermore, retailers need to develop their marketing strategies to get the best results across different channels, e.g., offering rewards, “click & collect” services, and in-store self-checkout using personal mobile devices. The possibilities are endless and it is critical that retailers embrace e-commerce as an opportunity.

The influence of e-commerce on retail is not one-way and some online brands have begun to open physical locations, seeking to broaden their brand exposure. This trend is testament to the need to provide consumers with a complete experience that includes the desired elements of both e-commerce and physical shopping. Whereas the internet can be a form of competition for brick-and-mortar shopping centers, it can also be a means to supplement and enhance what a shopping center offers its customers. Ultimately, e-commerce cannot provide the immediacy and convenience of a well-located urban center that reflects the demands and desires of the community it serves. Retailers are increasingly aware of this complex dynamic and are placing more and more emphasis on where they locate their brands. The changing retail landscape will see many shopping centers and regional malls in secondary markets struggle, but shopping centers in prime urban location, with optimal tenant mix and friendly, exciting shopping environments, will succeed as physical destinations and will benefit from the influence of e-commerce.

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