Toys 'R' Us has experienced a difficult couple of years, marked with flat sales and decreasing profits, mostly due to price competition from retailers like Amazon and Walmart. The company considers "showrooming" in its stores a considerable threat and one of the reasons for its current difficulties, as the practice enables price comparison and increases price competition.
The toy retailer's fears might be somewhat misplaced though. A recent Time article reports on a new study by the mobile marketing firm Vibes which found that "one-quarter of shoppers who showroom - just 6% of shoppers overall - are likely to do what we think of as pure showrooming, in which they check out an item in person in a store before purchasing it from a competitor. What's more, nearly 3 in 10 shoppers (29%) said that they used a physical store as a showroom and ended up buying the item not from a competitor, but from the physical store's own website. [Additionally] 48% of showrooming shoppers said that they felt better about their purchase after doing in-store research and shopping around on their phones." (To read more click here)
The Vibes study clearly proves that pure "showrooming" is a relatively small practice. Additionally, it points out that when the "showrooming" leads to a purchase, it is most of the time a transaction that takes place in that same store or in that store's website.
Certainly, any retailer wants to minimize pure "showrooming", however small it might be. In that respect, Toys 'R' Us is appropriately trying to develop exclusive products to its stores. However, producing its own tablet might not be the best way to do that, as the company runs a considerable risk in case the Tabeo is poorly received. As Needham & Co. toy analyst Sean McGowan tells the WSJ: "The downside to private-label products is if they flop, and have to be discounted, the retailer can't beat up the manufacturer." Let's not forget that the tablet market itself is highly competitive, even in the kids segment.
Toys 'R' Us would be better off partnering with smaller toy manufacturers to bring to market a number of exclusive new toys and variations of blockbusters, as it did in 2009 with the incredibly successful Zhu Zhu Pets. This is a winning tactic at the core of extremely profitable companies in other industries, like Trader Joe's, as we have seen in another post (3 Key Tactics that Retailers Should Learn from Trader Joe's).
However, given the actual enity of pure "showrooming", Toys 'R' Us should take additional and more important steps to halt its profit slide. I would suggest the following:
- Create a multi-channel strategy where customers can buy items at any time through multiple channels. As pointed out by the survey above almost 30% of "showrooming" customers ultimately purchase from the physical retailer's website. Toys 'R' Us could consider linking its numerous websites, enhancing its mobile capabilities and developing a strategy that integrates its stores with its online operations. Tourneau is a great example, as I have noted in a previous post (Tourneau Delivers Luxurious Experience with Multi-Channel Strategy).
- Enhance the in-store shopping experience, increasing sale staff, stressing the importance of customer service, organizing specific monthly activities and events, where kids can play with the toys, and allowing store managers to modify the regular in-store experience to cater to specific customers. LEGO's "Esperience Wheel" would be a useful tool (LEGO's Experience Wheel Reveals the 'Wow" Factor).
- Offer price-matching and train in-store staff to approach customers intent on showrooming to relay that information and help them with any other doubt or concern.