retail showrooming in canada

March 2013

Authors:J. Patrick Monteleone, Ph.D., Director, ResearchJesse Wolfersberger, Director, Consumer Insights

Retail Showrooming In Canada: Winning The Consumer & The Price

Of Keeping Buyers In-Store

TOGETHER WITH

Retail showrooming in Canada: Keeping buyers in-store

Smartphones have changed the way we socialize, travel, check the weather and how we get news.

They have also changed how we shop. Showrooming is a trend in shopper behaviour in which

customers visit a brick-and-mortar retail location and decide what item to buy, but instead of buying

that item in-store, they use their mobile device to find a better price – and ultimately purchase online.

Physical stores have advantages, among them is the instant gratification of having the purchased

product in hand. However, online retailers tend to have a price advantage. With less overhead, they

can undercut brick-and-mortar stores, often by a wide margin.

GroupM Next and Catalyst, the leader in search marketing innovation, teamed up to conduct

research in order to provide brands with an understanding of consumer behaviour as it relates

to showrooming in Canada. The question this research attempts to answer is, how much of a

discount will compel a customer to make an online purchase? All else equal, consumers would

prefer to have an item now, rather than later, so how much of a discount will it take for someone

to leave the store and wait for shipping? How many leave for 5% off? What about 10%? How many

shoppers will walk for merely pennies?

This research also aims to find out if all showroomers are the same, and what demographic

and behavioural flags identify a shopper who is likely to leave the store to buy online. A deeper

understanding of consumer behaviour in Canada will emerge so that retailers can address the

behaviour proactively.

In Fall 2012, GroupM Next conducted a similar study about showrooming based on consumer

behaviour in the United States. The important differences between these two studies are:

» Five of nine products featured were changed, with four retained for comparison.

» Three additional products were added to test and increase our understanding of consumer

choice dynamics.

» Additional testing was incorporated to better understand the roles that product shipping time,

being in-market for a product, presence of children and public transportation use all play in

consumer choice.

Key insights from the research, including differentiations between Canadian and American

consumers, are:

» Twenty percent of Canadian consumers prefer to remain in-store and purchase, compared to

10% of Americans.

» A majority of Canadians will leave a store and buy online if offered a $15 discount. The same

percentage of Americans will leave a store if offered a $5 discount.

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Of Keeping Buyers In-StoreMarch 2013

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» Among Canadian consumers, factors in a consumer’s purchase decision when faced with

showrooming, in the order of importance from highest to lowest, are: discount, shipping time

and familiarity with the retailer.

» When two-week shipping is the only option available, 5% more consumers will buy in-store,

compared to one-week shipping.

» Among Canadian consumers, being in-market, the presence of children and the use of public

transportation play no role in consumers’ likelihood of remaining in-store to buy.

Survey results

GroupM Next surveyed 2,000 Canadian shoppers, asking about 12 products across multiple retail

categories and at different price points. Respondents were given a hypothetical showrooming

scenario in which they could purchase a given product and own it immediately, or they could take

a discounted price, leave the store and have the product shipped.

The results show that, while

customers would rather have

the product immediately,

a small price difference is

enough to entice them to leave

the store and buy online.

When the online price is

just 2.5% lower than the in-

store price, 74% of Canadian

shoppers say they would stay

and buy in-store. When the

discount increases to 5% off,

63% of customers say they

would stay in-store. At a 20%

discount level, only a small number of shoppers (27%) will stay in-store. It is interesting to note that

throughout the study, when it comes to showrooming, there proves to be no meaningful difference

in preference or behaviour between English- or French-speaking consumers.

Of the products featured in the survey, Canadian consumers considered purchasing headphones

differently than the other products (the topmost point at each discount level in Figure A). While



100%90%80%70%60%50%40%30%20%10%0%

% P

urc

has

ing

In-S

tore

0% 5% 10% 15% 20%

Discount Offered Online (%)

Impact Online Discounts Have On In-Store Purchases (Canada)

Source: Retail Showrooming in Canada: Winning The Consumer & The Price Of Keeping Buyers In-Store; Catalyst/GroupM Next, 2013


Discount Offered Online ($)

% o

f Sh

op

per

s S

tayi

ng

In-S

tore

$0 $50 $100 $150 $200 $250

100%90%80%70%60%50%40%30%20%10%0%

Impact Online Cost Savings Have On In-Store Purchases (Canada)

Figure A

Figure B

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there was nothing present in the language of the question asked to suggest it, respondents showed

an implied urgency with headphones. It took a larger discount for shoppers to leave the store

when buying headphones than any other product. Interestingly, U.S. consumers revealed similar

behaviour as determined in our research of the U.S. marketplace. Among Canadian consumers, the

research reveals the second most likely product to have implied urgency is a set of tires. The least

likely product to have a sense of urgency is a laptop computer.

A similar story emerges when looking

at the data by dollar amount. If the

price difference between in-store and

online is close, shoppers prefer not

to wait for delivery. However, if the

difference is more than $15, a majority

of customers say they would leave.

In comparison, our research showed

that $5 is the tipping point among U.S.

consumers.

When consumers make choices,

decisions are not usually made

based on a single factor. In this study,

consumers were asked to choose

between buying in-store and online.

The questions featured varying combinations which included factors such as discounts, three

shipping options and familiarity/unfamiliarity with the online retailer. When deciding to purchase,

a discount factors for nearly 50% of the decision, while 25% is based on shipping, and 25% is

based on familiarity with the retailer. With shipping in particular, when two-week shipping is offered

(across all the products), brick-and-mortar retailers gain 5% more consumers willing to stay in-

store and purchase.

We do note that the nature of this survey potentially inflates the price sensitivity of shoppers,

as respondents were asked about products for which they may not necessarily be in the market.

Therefore, responders may report more price sensitivity than in a real-world situation. Additionally,

this was an online study, so in order to participate, all respondents must have some level of Internet

acumen. Therefore, there likely exists a percentage of offline-only shoppers who were not included

and, logically, that group is unlikely to showroom.



100%90%80%70%60%50%40%30%20%10%0%

% P

urc

has

ing

In-S

tore

0% 5% 10% 15% 20%

Discount Offered Online (%)

Impact Online Discounts Have On In-Store Purchases (Canada)



Discount Offered Online ($)

% o

f Sh

op

per

s S

tayi

ng

In-S

tore

$0 $50 $100 $150 $200 $250

100%90%80%70%60%50%40%30%20%10%0%

Impact Online Cost Savings Have On In-Store Purchases (Canada)

Figure A

Figure B

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What can retailers do?

Showrooming is a growing threat to brick-and-mortar retailers that don’t adapt to this increasing

consumer behaviour. However, it also creates opportunities both in-store and online for brands.

It is likely to become increasingly prevalent as more Canadians take to smartphones and become

comfortable purchasing online.

There are two ways to prevent showrooming – disrupt shoppers from using their mobile devices,

or be price competitive once they do. This research identifies that, if a brick-and-mortar store can

stay within 10% of the online price, about half of potential showroomers will choose to stay and

complete their purchases in the store.

Apple is an example of a brand that demonstrates how pricing can curtail showrooming. An iPod is

the same price across Apple stores, Best Buys, Apple.com and Amazon.com. The Apple business

model is difficult for many brands to imitate, but remains the prime example of successful pricing

in the smartphone society.

Pricing is a significant way to combat showrooming, but it is not the only strategy. Using a

logistic regression model to evaluate the customer’s decision to purchase in-store or buy online,

it becomes possible to find the shopper characteristics explaining a purchase decision. GroupM

Next completed such a model which revealed that consumers who are more apt to be showroomers

are more likely to be married, make online purchases frequently, are younger, and generally more

educated. When those variables are considered together, the resulting profile describes a person

who cares almost exclusively about price. When considering targeting, marketers should be wary

of driving that group of consumers into stores, as they are likely to showroom and leave. Instead,

brands have the opportunity to drive that group to their e-commerce site or other digital property

to make purchases.

There are a number of Canadian consumers – about 20% – who choose to complete the purchase

in-store, regardless of the discount offered. This is encouraging for retailers, as a core customer

base exists who appear unlikely to showroom. The key for marketers is to identify the next 10%

– the group of customers that are sensitive to price, but can be more easily swayed to purchase

in-store. Using the model, the group of “marginal showroomers” has the following characteristics:



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» Slightly more likely to be female

» Average age of 58

» Median income of $50,000 annually

» 50% have some college education or higher

» 53% make online purchases once per month

Marketers looking to respond to showrooming could target this profile in order to attract shoppers

who are more likely to stay and buy in the store.

Finally, showroomers exhibit behavioural cues. The model identified customers who compare prices

in-store are more likely to showroom and leave. It shows that shoppers who are price shopping in

the store are one step away from pulling out a mobile device and checking online prices. Using this

information, retailers can train associates to watch for this behaviour and intervene at key decision-

making moments. Additionally, the model revealed that sales associates can be influential. Canadian

customers who interact with an associate are more likely to stay and purchase in-store. Conversely,

customers who price-check using their mobile device are less likely to stay. These two behaviours

cancel each other out. By engaging the shopper, the associate disrupts the mobile behaviour and

increases the chance of the customer staying in-store and buying a product.

Several retailers have taken action to turn showrooming into opportunity. Future Shop, Canada’s

largest consumer electronics retailer, provides easy access to locations, reviews and prices on its

mobile application, encouraging showrooming in a controlled way. Future Shop also has a robust

price-matching policy that beats competitors’ prices by 10%. Loblaw’s, Real Canadian Superstore

and Home Depot all price match competitors’ flyers and promotional discounts. Retailer Target

offers exclusive in-store items, and, as it enters Canada in 2013, may extend its aggressive price-

matching policy beyond the holiday season.

With the right pricing, in-store strategy, digital presence and engagement with the consumer at the

touch points where they shop, brick-and-mortar retailers can compete in the smartphone era.

Methodology

GroupM Next and Catalyst, in conjunction with Global Market Insight (GMI), surveyed 2,000 Canadian shoppers, asking

about 12 products in multiple retail categories at varying price points, with different shipping times. Shoppers surveyed

were given hypothetical purchase decision scenarios in which they could purchase a given product and own it immediately,

or they could take a discounted price, leave the store and have the product shipped with varying shipping times.

GroupM Next is the forward-looking, innovation unit of GroupM, the world’s largest global media investment management group

that is the parent company to WPP media service agencies Maxus, MEC, MediaCom and Mindshare, as well as Catalyst and

Xaxis. Together with GroupM agencies, GroupM Next focuses on the curation and application of insight-focused solutions across

online, social, mobile and addressable channels. Through thought leadership, technology, research and education, GroupM Next

delivers data-driven, actionable insights and a clear path to action to help GroupM agencies and their clients harness the right

opportunities made possible in the digital technology and new media industry environments with speed and relevance. Access

our work and discover our perspective at www.groupmnext.com.

Contact us with questions or comments: [email protected]

GroupM Next111 Westport Plaza

Suite 350Saint Louis, MO 63146www.groupmnext.comA WPP Company

retail showrooming in canada

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