Edrian Pamintuan

How Luxury Survives in a
Showrooming World

The Changed World of High End Retail

Gone are the days of establishing customer-specialist relationships in a brick and mortar shop. We’ve evolved into a consumer culture of instant gratification while still valuing good quality with excellent prices. While one generation prioritized excellent customer service, the next one tries to understand how to get free shipping with the fastest delivery time.

This disparity in consumerism has led to the rise of two very distinct shopping models: showrooming and webrooming. Showrooming is the act of physically inspecting an item in a traditional brick and mortar store before heading home to purchase it online for a much cheaper price. Webrooming is the exact opposite; consumers look at an item online before heading into a physical store to purchase it. The former is a much more common practice than the latter. So what’s a business to do when they notice their customer count dwindling? Is it more noble to stick to the old ways and (hopefully) ride this wave out? Or is that just a recipe for inevitable failure?

Whole retailers that had once been so prevalent in their own respective fields bowed to this new model and quickly ceased operations. Luxury department stores like Barney’s New York, Lord & Taylor, and Henri Bendel all met their deaths at the hands of showrooming. But what these stores had in common was they all made one crucial mistake: they fought what they thought was just a trend rather than accepting it as the new norm and adjusting.

“If Best Buy could match prices, then no one would leave without a purchase.”

Adapting to the New Norm of Luxury

A luxury brand has to adjust with their own needs rather than duplicating an already existing model outright.

A perfect example of a business that adjusted well is Best Buy. During a period between the late 2000s and the early 2010, Best Buy felt online retail’s wrath and was quickly beginning to bend under the same pressure that took other big box store behemoths. What happened next is nothing short of marketing and business operation genius. Best Buy understood the adjusting climate, took note of what exactly was taking their customers away, and tried to offer what online retailers like Amazon couldn’t offer. Online retailers like Amazon didn’t just offer cheaper prices; any store can do that to gain traffic, online or in person. They understood Amazon’s ease of use. From there, Best Buy overhauled their internal search engine. Employees and customers alike could see which items were in stock, what specs they were looking for, and even similar products that were offered at cheaper prices within their stores. To compete with what Best Buy thought of as a major void in online retail, they amped up their employee training and turned every employee into a specialist in their field, something that had long disappeared since online stores came onto the scene. To compete with the perceived convenience of online shopping, Best Buy also began to allow customers to reserve products online and have it available for pick up at the customer’s convenience. If said item was out of stock, Best Buy would suggest the nearest location where the item was available.

Price matching was another contributing factor to Best Buy’s survival in this new consumer landscape. While some naysayers initially saw this as a potential massive loss for the company, former Best Buy CEO Hubert Joly argued that “if Best Buy could match prices, then no one would leave without a purchase. Until I match Amazon’s prices, the customers are ours to lose”. This understanding of the customer’s concern for affordability is a huge factor in what kept Best Buy afloat while its contemporaries fell to the wayside. The final factor that helped Best Buy stay alive was its deals with electronic giants like Samsung and Apple. Think of a store-within-a-store, where each company rents a space from Best Buy and offsets the money they’re losing from their price-matching system.

So what can other businesses do to adjust to this new way of consumerism? Following Best Buy’s model would be a great start, but a luxury brand has to adjust with their own needs rather than duplicating an already existing model outright.

“Until I match Amazon's prices, the customers are ours to lose”

- Hubert Joly, Best Buy CEO

Use Affluent Reputation to its Advantage

High end retailers still have a place in this age.

While stores like Barneys New York are iconic, they are only so to a certain extent. Native New Yorkers are familiar with the high end department stores of the Upper East Side but to the general population, a phrase like Lord & Taylor may just as well be Icelandic. Fashion house icons like Louis Vuitton, Burberry, and Versace are known throughout the world and in doing so have attained an enviable immunity to the reshaped consumer landscape. These names carry on because of exactly that: their names.

Henri Bendel, known throughout the east coast and a mecca of chic to the fashion-conscious, was a business that had been around for 113 years before it shut its Manhattan flagship store for good in 2018. Barneys New York quickly followed suit in 2019. What these stores relied on was their reputation within a minute area rather than focusing on spreading their social approval to a much broader audience. Such is the case with Nordstrom and how it’s poised to be a true survivor of the showrooming doom.

According to The Motley Fool, part of Nordstrom’s success stems from its target audience and its tech-savvy method. This strategy of operations not only entices new customers, but retains its existing customers as well. According to The Motley Fool, Nordstrom does particularly well with younger shoppers, with data from Viant revealing that 51% of its shoppers are between the ages of 18 and 34, in comparison with the same demographic being only 37% of Macy’s shoppers. In addition to achieving a high amount of younger shoppers, 40% of Nordstrom shoppers also boast a six-figure income. With these stats, Nordstrom features a crowd that’s more likely to be open to the retailer’s online offerings with a greater discretionary spending capacity.

Location also plays an important factor in Nordstrom’s survival. What retail giants like JCPenney and Macy’s did was spread out their locations into almost every mall in every corner of the United States. What Nordstrom did differently was that it strategically built locations in malls that were in higher income areas. In retrospect, malls that were built in these areas were more likely to retain higher in-person figures and less likely to close or lose major anchor stores. With high-end malls placed in more affluent areas, these brick-and-mortar retailers use their reputation to stay afloat and draw in physical customers while offering great deals that those same customers can find online.

What Nordstrom is doing to survive the showrooming apocalypse was set forth years before the general public began seeing the demise of brick-and-mortar stores. Their strategic plan of opening locations in selective areas along with revamping and retooling their website to appeal to a more tech-savvy crowd ultimately proved to be their saving grace, proving that high end retailers still have a place in this age.

A Change in Operations

Another way luxury brands could benefit from showrooming is obtaining a better cost structure. Paring down on retail space for products as well as reducing warehouse need for said products allows companies to not only save money, but to reduce prices on popular items. This lowered price, some even on par with online prices, gives customers a chance to see a product in store and purchase it right there and then. While the numbers may take awhile to catch up, getting shoppers to convert from browsers to purchasers is still a great step in the right direction.

Other than adopting the features that Best Buy utilized, like offering free shipping and delivery and price-matching policies, there are other store-specific offers that brands can adopt to bring more customers into the store. Ideas like exclusive in-store offers and rewards incentivizes customers to make the journey into the store. It’s a form of price matching, but with something so readily available at a lower price, customers get that instant satisfaction right there rather than heading home, putting in the order, and waiting for the item to be delivered.

It should be interesting to note that while online shopping has become the new norm, there are habits within that to monitor as well. According to Statista, it should come to nobody’s surprise that the device most people purchase products from is their smartphone. It’s quick, convenient, and depending on the brand’s webpage, purchases can be made right there in the store as the customer is physically inspecting that very same item. There is a strategy in compelling an already in-store customer to purchase that same product from the brand’s online store. With factors like trained employees that became specialists in their department and website-exclusive sales and prices, brands have the potential to compel customers to buy a product on their own website, even when they’re in-store inspecting the item.

Adapting to the changing times doesn’t have to mean completely revamping a business model. Sometimes something as simple as changing the layout of the store can draw more visitors. Elevating the design of your store not only draws visitors that are curious to see the layout, it can also be a chance to showcase other items instead of the more popular items. In addition to treating customers with an alluring design, providing them with top notch customer service can be the deciding factor in them purchasing a product in-store. When consumers purchase goods online and decide to return them, oftentimes they just don’t want to go through the hassle of packing it up, printing a return label, going to an approved shipping place and sending it out while it takes a while for the return to process (not to mention the time it takes for the money to return from the original account). Oftentimes, customers will decide that this process is too arduous and would rather opt to not even get the return process started, even if it means they’ve wasted their money. Brands can capitalize on this by striving to provide excellent customer service that allows for a seamless, stress-free return system in store.

Another prominent example of a luxury brand that keeps on chugging is the department store, Saks Fifth Avenue. Saks Fifth Avenue is a luxury retailer owned by Hudson’s Bay Co. that, earlier in the beginning of the pandemic, saw what would become the state of consumerism and quickly managed by cutting store hours, canceling orders and delaying others and dialing back on items that wouldn’t make sense in a work-from-home world, like men’s suits. Saks Fifth Avenue saw the shift early on in the pandemic where a work-from-home culture was rising. This meant a lower need for formal suits and business casual outfits but a much higher need for colognes and perfumes, since people would start staying home with their roommates or loved ones much more often than before. According to the article “How Saks Fifth Avenue is providing luxury shoppers with ‘comfort food’ during the pandemic” by Forbes magazine, Saks president Marc Metrick points Saks’ success to their changed priorities. Metrick goes on to say “It’s all about fashion and about having the right balance. Our top-performing businesses right now are men’s footwear, men’s sportswear, women’s footwear, leather goods, fragrances. Everyone wants to smell good because they’re hanging around the same people all day.”

Adaptability isn’t just a regular old aspect to consider when running a business, it is a crucial necessity and in most cases, the deciding factor in company growth. The world may have changed drastically throughout the last few years but tastes haven’t changed. People will still want their finely-made articles of clothing or their luxurious signature scents; one just has to have enough foresight to see where the changes are happening.

Conclusion

The most important thing to consider when toggling between the ideas of fighting or embracing showrooming in a business is that the world has turned digital. From the way students learn in the classroom to the way consumers decide to purchase products, almost everything has gone through the digital wringer. But this doesn’t have to spell death to the old ways. When a business learns to adapt and see the ways that they can still be successful in this era, survival is just on the horizon. Lord & Taylor, Henri Bendel, and Barneys New York dismissed the internet as a fad and assumed that humans will default back to their old consuming habits. But with the right adjustments and a revamped business model, luxury brands can be just as successful in this age as it always has been in the past.

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