Showrooming is the process in which a shopper goes in a physical store to browse for products. Webrooming is the reverse process of showrooming. In the showrooming process, instead, consumers browse for products in the physical store, to finalize the purchase on an online platform at a lower price.
Aspect
Webrooming
Showrooming
Definition
Webrooming is a consumer behavior where individuals research products or services online before visiting a physical store to make their purchase.
Showrooming refers to the practice of visiting a physical store to examine a product in person before purchasing it online, often at a lower price.
Online Research
Shoppers primarily conduct online research, including reading product reviews, comparing prices, and gathering information about features and specifications.
Shoppers use the physical store as a showroom, examining the product in person, testing it, and asking questions to sales associates.
Motivation
Webroomers use online resources to make more informed decisions before visiting a store to ensure they make the right purchase.
Showroomers are motivated by the desire to physically interact with a product and seek expert advice but may ultimately buy it online due to price advantages.
In-Store Behavior
In-store visits by webroomers are purposeful, often resulting in quicker, more decisive purchases since research has already been done online.
In-store behavior of showroomers may involve extensive product exploration, which may or may not lead to an immediate purchase in the physical store.
Retailer Impact
Webrooming is generally seen as advantageous for traditional retailers, as it drives foot traffic to physical stores, where customers may make additional purchases.
Showrooming can be challenging for physical retailers, as it may lead to lost sales if customers buy the same product online from a different seller.
Technology Role
Webrooming relies on online resources such as e-commerce websites, review platforms, and mobile apps to facilitate research and product comparison.
Showrooming leverages mobile devices and price comparison apps to quickly find online deals while in the physical store.
Examples
1. Researching smartphone features online before visiting an electronics store to make an informed purchase decision. 2. Reading reviews of fitness trackers before going to a sporting goods store to buy one.
1. Visiting an electronics store to test a camera’s features, then ordering it online from a different retailer for a lower price. 2. Trying on clothing in a clothing store and later purchasing it from an online fashion retailer.
Table of Contents
How are showrooming and webrooming connected to business model innovation?
Everywhere we look, it seems there are phenomena of business model innovation through disruption. In this article, I want to highlight how change is in many cases, evolutive, rather than disruptive. And how processes that are successful in the short-term, can be reversed.
Indeed, business model innovation often goes through changing consumers habits, and as incumbents adopt new technologies to force new consumers behavior. Over time established industries and organizations manage to take advantage of their traditional positioning to reverse the consumers’ behavior in their favor.
Let’s see the case of how brick-and-mortar retailers have reversed a phenomenon called “showrooming,” which was eating up most of their margins.
What is Showrooming?
Showrooming is the process in which a shopper goes in a physical store to browse for products. However, before purchasing them, the consumer has access to reviews sites, e-commerce platforms, and comparison sites, where she has the option to buy the same product at a lower price. Thus, while the consumer makes a choice in the brick-and-mortar store, she eventually finalizes the purchase on an online store.
In this scenario, the physical retailer loses margins, and it sees its business stolen by online players that make it easy for consumers to showroom for products. We saw the Best Buy case and how the company had to adapt its business model to survive.
Interestingly enough innovation is an evolutive process, where more traditional players learn how to take advantage of new and existing technologies to reverse the process that tightened their margins in the first place.
What is Werbrooming? Reverse showrooming in a nutshell
Webrooming is the reverse process of showrooming. Where in the showrooming process, consumers browse for products in the physical store, to finalize the purchase on an online platform at a lower price. With webrooming the consumer browses for the product on an online store, to complete the purchase on a physical store.
While showrooming makes perfect sense, as consumers can find products to buy at a lower price, why do people webroom?
People webroom for several reasons. For instance, because for items over a specific budget, it makes sense to experience it on the physical store before making the final purchase. Or for a specific category of products (for instance apparel or groceries) finalizing the purchase, in the physical store might make more sense.
Thus, webrooming is a weapon that physical stores can leverage on to actually bring more people that browse online.
Is there a winner?
Consumer behavior is a complex issue.
Thus, it is essential to notice that there isn’t a definitive answer to what behavior will dominate, and probably both will curve their space. However, as new technologies will allow consumers to simulate experiences (like trying shoes or sunglasses through augmented reality), it becomes more challenging for physical stores to keep up with online counterparts.
However, if physical stores will be able to redefine their value proposition, and redefine the way they make money, there might be a space to reverse the digital processes that will inevitably bring more consumers to perform more and more actions online or in an augmented reality.
Showrooming Examples:
Electronics Retail: A customer visits an electronics store to test out the latest smartphone models but later purchases the chosen phone online from a different retailer offering a lower price.
Bookstore: A shopper browses through books in a local bookstore, notes down the titles, and then orders them online for home delivery or in an e-book format.
Clothing Retail: A customer tries on various clothing items in a fashion store, takes pictures, and searches for better deals on similar items from online retailers.
Furniture Shopping: Shoppers visit a furniture showroom to see and feel the furniture’s quality and design. They then search online for better prices or discounts.
Webrooming Examples:
High-End Electronics: A customer researches high-end home theater systems online, reads reviews, and compares prices. They then visit a physical electronics store to make their purchase and seek expert advice.
Automobile Shopping: A car buyer explores different car models, configurations, and financing options on a manufacturer’s website. They visit local dealerships to test drive the chosen model and negotiate a deal.
Grocery Shopping: An individual makes a grocery list using a supermarket’s mobile app, taking advantage of online promotions. They visit the store to pick up the items, saving time on selecting products.
Home Appliances: A consumer investigates energy-efficient appliances online, studies product specifications, and customer reviews. They visit an appliance store to physically assess the products before making a selection.
Business Model Innovation Examples:
Netflix: Netflix transformed the video rental industry by shifting from physical DVD rentals to a subscription-based streaming service, disrupting traditional rental stores.
Amazon: Amazon started as an online bookstore but expanded its business model to become a global e-commerce giant, cloud services provider (Amazon Web Services), and more.
Uber: Uber revolutionized the taxi and transportation industry by introducing a business model based on ride-sharing, accessible through a mobile app.
Airbnb: Airbnb disrupted the hospitality industry by allowing homeowners to rent out their properties to travelers, offering an alternative to traditional hotels.
Tesla: Tesla’s innovative business model combines electric vehicle manufacturing with direct-to-consumer sales and over-the-air software updates, redefining the automotive industry.
Apple: Apple shifted from a focus on hardware sales to a more service-oriented model, offering services like Apple Music, iCloud, and the App Store as significant revenue streams.
Subscription Boxes: Companies like Birchbox and Blue Apron introduced subscription box models, delivering personalized products or meal kits directly to customers’ doors.
Key Highlights
Showrooming: This shopping phenomenon involves customers visiting physical stores to explore products but opting to make their purchases online, often at a lower cost.
Webrooming: In contrast to showrooming, webrooming is when consumers research products online but ultimately decide to buy them in brick-and-mortar stores. This behavior is common for high-budget items or certain product categories.
Business Model Innovation: Business models evolve, sometimes driven by shifts in consumer behavior due to technological advancements. Innovations may aim to address new customer habits and preferences.
Evolutionary Change: Business modelinnovation isn’t always disruptive; it can also involve gradual adaptations to changing consumer behaviors. Established industries and organizations leverage their existing strengths to reverse adverse trends.
Showrooming Challenge: Brick-and-mortar retailers face challenges as showrooming erodes their profit margins. Consumers use physical stores for research but complete purchases online, impacting traditional retail businesses.
Webrooming Opportunity: Physical stores can leverage webrooming by attracting consumers who initially research products online to their physical locations. This approach allows traditional retailers to benefit from online research.
Winner Uncertain: The future balance between showrooming and webrooming remains uncertain. Both behaviors may coexist, with technology playing a pivotal role in shaping their dynamics.
Augmented Reality: Emerging technologies like augmented reality could further disrupt traditional retail. For example, consumers might virtually try on shoes or sunglasses, potentially diminishing the appeal of physical stores.
Adaptation Key: Physical retailers must redefine their value propositions and revenue streams to remain competitive in a changing retail landscape. Adapting to evolving consumer preferences is essential for their survival and success.
In business, vertical integration means a whole supply chain of the company is controlled and owned by the organization. Thus, making it possible to control each step through customers. in the digital world, vertical integration happens when a company can control the primary access points to acquire data from consumers.
Backward chaining, also called backward integration, describes a process where a company expands to fulfill roles previously held by other businesses further up the supply chain. It is a form of vertical integration where a company owns or controls its suppliers, distributors, or retail locations.
The supply chain is the set of steps between the sourcing, manufacturing, distribution of a product up to the steps it takes to reach the final customer. It’s the set of step it takes to bring a product from raw material (for physical products) to final customers and how companies manage those processes.
A classic supply chain moves from upstream to downstream, where the raw material is transformed into products, moved through logistics and distribution to final customers. A data supply chain moves in the opposite direction. The raw data is “sourced” from the customer/user. As it moves downstream, it gets processed and refined by proprietary algorithms and stored in data centers.
Horizontal integration refers to the process of increasing market shares or expanding by integrating at the same level of the supply chain, and within the same industry. Vertical integration happens when a company takes control of more parts of the supply chain, thus covering more parts of it.
According to the book, Unlocking The Value Chain, Harvard professor Thales Teixeira identified three waves of disruption (unbundling, disintermediation, and decoupling). Decoupling is the third wave (2006-still ongoing) where companies break apart the customer value chain to deliver part of the value, without bearing the costs to sustain the whole value chain.
When entering the market, as a startup you can use different approaches. Some of them can be based on the product, distribution, or value. A product approach takes existing alternatives and it offers only the most valuable part of that product. A distribution approach cuts out intermediaries from the market. A value approach offers only the most valuable part of the experience.
Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all, can produce products that customers want.
Reintermediation consists in the process of introducing again an intermediary that had previously been cut out from the supply chain. Or perhaps by creating a new intermediary that once didn’t exist. Usually, as a market is redefined, old players get cut out, and new players within the supply chain are born as a result.
Scientific Management Theory was created by Frederick Winslow Taylor in 1911 as a means of encouraging industrial companies to switch to mass production. With a background in mechanical engineering, he applied engineering principles to workplace productivity on the factory floor. Scientific Management Theory seeks to find the most efficient way of performing a job in the workplace.
Poka-yoke is a Japanese quality control technique developed by former Toyota engineer Shigeo Shingo. Translated as “mistake-proofing”, poka-yoke aims to prevent defects in the manufacturing process that are the result of human error. Poka-yoke is a lean manufacturing technique that ensures that the right conditions exist before a step in the process is executed. This makes it a preventative form of quality control since errors are detected and then rectified before they occur.
A Gemba Walk is a fundamental component of lean management. It describes the personal observation of work to learn more about it. Gemba is a Japanese word that loosely translates as “the real place”, or in business, “the place where value is created”. The Gemba Walk as a concept was created by Taiichi Ohno, the father of the Toyota Production System of lean manufacturing. Ohno wanted to encourage management executives to leave their offices and see where the real work happened. This, he hoped, would build relationships between employees with vastly different skillsets and build trust.
Product discovery is a critical part of agile methodologies, as its aim is to ensure that products customers love are built. Product discovery involves learning through a raft of methods, including design thinking, lean start-up, and A/B testing to name a few. Dual Track Agile is an agile methodology containing two separate tracks: the “discovery” track and the “delivery” track.
Scaled Agile Lean Development (ScALeD) helps businesses discover a balanced approach to agile transition and scaling questions. The ScALed approach helps businesses successfully respond to change. Inspired by a combination of lean and agile values, ScALed is practitioner-based and can be completed through various agile frameworks and practices.
Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.
The Toyota Production System (TPS) is an early form of lean manufacturing created by auto-manufacturer Toyota. Created by the Toyota Motor Corporation in the 1940s and 50s, the Toyota Production System seeks to manufacture vehicles ordered by customers most quickly and efficiently possible.
Six Sigma is a data-driven approach and methodology for eliminating errors or defects in a product, service, or process. Six Sigma was developed by Motorola as a management approach based on quality fundamentals in the early 1980s. A decade later, it was popularized by General Electric who estimated that the methodology saved them $12 billion in the first five years of operation.
Business modelinnovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
