Webrooming’s Threat; Goal-Pursuit in Loyalty Programs

UMD-Smith Marketing Experts Comment on Holiday Retail Trends, Tactics 

COLLEGE PARK, Md. – Nov. 20, 2014 – Post-recession shoppers, some cautious, others shortcutting to bargains, are increasingly “webrooming.” The tactic involves studying prices and products online, then purchasing from brick and mortar stores. 

Contrasting “showrooming’s” in-store browsing followed by online purchasing, webrooming has prompted Amazon to open offline stores for the holiday season in New York and San Fransisco. “Look for mall and store traffic to increase and begin to threaten online sales volume,” says P.K. Kannan, Ralph J. Tyser Professor of Marketing Science, at the University of Maryland’s Robert H. Smith School of Business. 

Meanwhile retailers are ramping up efforts to connect with consumers on their mobile devices and tapping into shopper goal-pursuit to fuel customer loyalty promotions. 

Kannan, and other Smith School marketing experts, connect these trends to the holiday shopping season: 

Showrooming Decline Looms as Webrooming Rises

Kannan: “In recent years, we’ve heard a lot about showrooming shifting the sales of big ticket items from offline to online stores. Such items, especially electronics, remain popular with holiday shoppers, so this trend continues. Consequently offline retailers selling branded, standard products will continue to see sales volumes being eaten away by cheaper online stores.” 

“But look for showrooming’s effect to decrease in coming years as webrooming increases, especially for holiday shopping. Offline stores will benefit from a likely sales volume shift from online stores. The reason is two-fold.  The price differential between online and offline purchases – significantly for standard, branded products – will decrease as taxes are levied on online purchases on top of shipping costs that consumers bear. This is further compounded by the tendency for holiday-season consumers to be short of time, plan less, and want immediate possession of the items. 

“Secondly, attributes such as quality and fit, besides cost, play a much more important role for non-standard items like a dresses or scarves. Also, when prices vary significantly across outlets online, consumers start doubting the quality. These factors make physical inspection of the products even more important. Again, offline stores benefit. 

“The pendulum is swinging back, at least for now, to the offline retailers. So, webrooming should be a real concern for online retailers especially during the holiday season.” 

Goal-Pursuit Motivates Shoppers

Anastasiya Pocheptsova : “Consumers’ decisions are frequently driven by what might appear as arbitrary numerical markers. A promotion that gives away a product after consumer spends X dollars or buys X number of products is processed as an implicit goal or reference point suggesting that this an acceptable amount to spend. 

“Normally, retailers place that spending target just shy of consumers’ average spending to benefit from the fact that when a person is just shy of reaching its goal he or she is the most motivated.

Of course a “prize” -- such as a free turkey -- for reaching the goal that is relevant helps as well. 

“Thus, consumers not only walk away from the store with more products and a free turkey, but also with a feeling of accomplishment, something that money cannot buy.” 

Social Media, Mobile Devices Increasingly Reach Shoppers

Jie Zhang: “In addition to offering Black Friday-like deals earlier than ever, many retailers are embracing social media and mobile technologies in a fierce competition to connect with consumers, who largely remain cautious shoppers in a lingering effect of the post-recession economy. This approach is helping drive online retailing to increase its share of total holiday shopping spending. 

“IBM predicted mobile devices will facilitate about half of this season’s holiday shopping. This attests to the importance of retailers disseminating holiday deals in digital media and providing user-friendly mobile apps to facilitate online shopping.” 

Loyalty Programs, Free Turkeys Strike Sentimental Chord

Zhang: “Loyalty reward promotions, like those awarding free turkeys, generally work well because they cater to what consumers want and value. From the consumers’ perspective, the incentive is not only about getting a reward for their purchases, it’s about the retailer impressing upon the shopper that (the retailer) ‘really knows what I want and cares about my needs.’ Around the holidays, and especially Thanksgiving, retailers invest in a notion that ‘nothing warms the heart more than a free turkey.’” 

Contact:

P.K. Kannan, Ralph J. Tyser Professor of Marketing Science
pkannan@rhsmith.umd.edu 

Anastasiya Pocheptsova, assistant professor of marketing
apochept@rhsmith.umd.edu 

Jie Zhang, associate professor of marketing
jiejie@rhsmith.umd.edu