If you’ve got a smartphone, then odds are you’ve already done a horrible deed once in your life, perhaps without even realizing it. And if you have, you’ve also — allegedly — participated in the demise of at least one of your local retailers.
The sinister activity is called “showrooming”: the act of examining a piece of merchandise in a store, then using a smartphone to find and buy that item online at a lower price through a site like Amazon (NASDAQ:AMZN).
Electronics retailers like Best Buy (NYSE:BBY) have bemoaned the trend ever since web-enabled smartphones started taking a bite out of business. And make no mistake — consumers are showrooming, and electronics retailers are consumers’ primary targets. A recent comScore survey verified that six out of 10 shoppers who performed a showrooming search at an electronics store ended up buying that item online instead.
It wasn’t just electronics that were, and are, falling victim to savvy consumerism, though. Apparel, books, toys and even appliances are all being showroomed, and your local stores and shops are noticing it on their top and bottom lines.
But while the practice is widespread, it’s not yet universal. A couple areas are slipping through the cracks.
The Exception to the New Norm
Have you happened to notice shares of Dicks Sporting Goods (NYSE:DKS), Foot Locker (NYSE:FL), and Cabelas (NYSE:CAB) are all beating the daylights out of the market this year? To be fair, they’re all a little overbought right now and due for at least a modest cooling. But there’s little doubt the market prefers those names over most of their competitors.
More important, have you noticed these three underlying companies are doing strangely well despite the advent of showrooming?
Dick’s Sporting Goods has posted four straight quarters’ worth of high year-over-year sales growth, and has generated high YOY profit growth in three of the past four quarters. Cabelas is 4-for-4 on the quarterly revenue as well as the income growth front. The same goes for Foot Locker. And it’s not like any of those retailers sells anything that can’t easily be found online.
Could it be that a brick-and-mortar store might be able to thrive in the new digital era?
In simplest terms, yes, it’s entirely possible. The difference is all in how a retailer handles the smartphone-armed, showrooming customer. Whereas Best Buy is just missing the mark completely, Dick’s Sporting Goods is hitting the nail on the head.
Right and Wrong
What works and what doesn’t to prevent the loss of a sale due to showrooming ultimately depends on respect for the customer, or contempt for the customer.
Best Buy has verified the contempt route doesn’t work. Even before the rise of using smartphones to comparison shop, Best Buy had developed a reputation for poor in-store service, aggressively pushed (and meaningless) warranties and excessive prices. The onset of web-enabled smartphones simply pushed the already-teetering company over the edge.