Amazon is winning the war in-store but through their showrooming study Parago have uncovered how retailers can beat Amazon; by matching e-tailer prices with rebates.
“Sophisticated e-tailers are using dynamic pricing models, which are real-time price adjustments based on market demands, consumer behaviors, competitive insights and other data centric factors, coupled with the explosion of smartphones to steal customers while they are shopping in store.” (Dynaic Pricing Report, Parago, 2013)
In other words, many shoppers visit a bricks-and-mortar store, view a product and then compare its price online. This is where online retailers are stealing sales from retail stores as they’re usually cheaper. Google identified this new process back in 2011 and refer to it as ZMOT or the Zero Moment of Truth. You can learn more on their website www.zeromomentoftruth.com
“ZMOT is that moment when you grab your laptop, mobile phone or some other wired device and start learning about a product or service you’re thinking about trying or buying.” (Winning the Zero Moment of Truth, Jim Leckinski, Google 2011 p.9)
Foolpoof, Europe’s biggest user experience design specialists, surveyed shoppers in the run up to Christmas 2012. Their research found that 24% of people showroomed while Christmas shopping – and 40% of them took their business elsewhere. (The True Impact of Showrooming)
Parago’s research has recorded a 400% increase in 2013 compared to 2012 and that “Amazon is the #1 way US consumers compare prices on their smartphones at physical stores.” (Dynamic Pricing Report)
So how competitive is the showrooming price war?
“a price difference of just $5 in many cases can sway the purchase decision to Amazon.” (Parago, 2013)
However, John Fleming, Chief Scientist at Gallup research, stated that
“Customers shop based on price when price is the only thing that differentiates competing offerings … when they don’t have an emotional connection to a particular retailer ― when they are not engaged as customers,”
He went on to say that
“The surest way to improve engagement with retail customers is through the sales staff. A talented and engaged sales staff can help customers find what they are looking for…”
You can read John’s full article titled The Myth of “The Peril of ‘Showrooming.
Traditional retailers CAN beat Amazon; here’s how.
While the above findings look quite dismal for brick-and-mortar stores who have to pay rent, sales and business rates there is a silver lining for these traditional retailers. The majority of customers will shop and buy more often at stores that have Amazon price-match rebate guarantees.
“The findings clearly show when a retailer matches e-tailer prices with rebates , which provide healthier margins than instant discounts, the majority of consumers will shop and buy from the store more often, across all incomes levels and retail categories.” (Parago, 2013)
So say a shopper looks at a $50 item in store but discovers Amazon are selling it for $40. 67% of shoppers would buy from the store over Amazon if the store offered a $10 rebate to match Amazon.
Other interesting insights
One other insight Parago uncovered is that this price war isn’t limited to low income households. In fact “the higher the income, the greater the propensity to switch to Amazon to save $5 on a $50 item.” (Parago, 2013)
- When annual household income = $200,000+ 73% of shoppers would switch to Amazon to save $5
- When annual household income = less than $19,999 51% of shoppers would switch to Amazon to save $5
I recommend you view the full research article over at Parago. The information is really easy to take in as they’ve put it into a nice infographic PDF and it’s free.
For the comments
Do you struggle with shoppers who use your brick-and-mortar store as a showroom? If so would you be willing to offer an Amazon price match rebate? Share your thoughts in the comments below.