webrooming-and-showrooming

Webrooming And Showrooming In A Nutshell

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.

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.

Connected Business Phenomena

bundling
Bundling is a business process where a series of blocks in a value chain are grouped to lock in consumers as the bundler takes advantage of its distribution network to limit competition and gain market shares in adjacent markets. This is a distribution-driven strategy where incumbents take advantage of their leading position.
decoupling
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.
unbundling
Unbundling is a business process where a series of products or blocks inside a value chain are broken down to provide better value by removing the parts of the value chain that are less valuable to consumers and keep those that in a period in time consumers value the most.
disruptive-business-models
As pointed out in the book “Unlocking The Value Chain” by Thales Teixeira, business model disruption has followed three waves: unbundling (1994-99), disintermediation (2000-05), and decoupling (2005-onward). Today what’s disrupting the business world is the wave of decoupling. That consists in breaking the customer value chains by identifying valuable activities that can be performed by the decoupler, which can capture a good chunk of the business value from incumbent companies.
disruptive-innovation
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.
types-of-innovation
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).
types-of-innovation
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).

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