Showrooming is looking at goods or items at a store and then purchasing them at a reduced cost online. Businesses that historically relied on in-person purchases, like Best Buy, have witnessed substantial drops in sales income (“There’s no business like showroom business”, n.d.). Since Best Buy sells kitchen equipment online while displaying products in the store, it is a common target of showrooming. As a result of a societal trend toward online purchasing, businesses like Amazon dominate the industry. Thus, the situation requires precise SWOT analysis and the changes adjusted to the strategy.
Showrooming harms brick-and-mortar establishments since it frequently benefits online stores and third-party applications from product sampling in physical locations. The main issue with showrooming is that it occurs all year long, and as society moves toward a more technologically advanced environment, showrooming becomes more prevalent. Amazon has developed a mobile app that enables users to compare prices on items they see in physical locations and save them for later purchase at a lower cost. Best Buy established its price-matching policy, whereby the stores will meet the prices given by the other brick-and-mortar retailers and online merchants to counteract the practice of showrooming. Although this regulation was explicitly implemented for rooms, it has unintended consequences, which SWOT analysis helps to identify.
A SWOT analysis consists of strengths, weaknesses, opportunities, and threats. Starting from the strength is in the price-matching strategy of the company. Although it seems to affect Best Buy exclusively, consumers who often shop online are more willing to visit the physical location to receive a better bargain and avoid waiting for the item to be delivered. Best Buy would have to completely cut the price of its items if the price-matching policy they presently have was repealed, reducing their profit margin on all transactions.
The company’s weakness is that Best Buy would miss full-priced sales due to the price-matching strategy. Customers could benefit from the price-matching approach due to losing full-price sales, reducing Best Buy’s future earnings. Best Buy locations may overcome their constrained shipping capabilities by ensuring their inventory is continually supplied. This is an opportunity for the organization since they can attract and retain more customers while always having the products in stock.
The main threat is when Amazon lowers the pricing of its items to the point that Best Buy is no longer able to match those prices. It forces Best Buy to sell its products for less than it could afford to and reduces its earnings. This could be the case if they choose to price-matching technique, but if they want to do away with it, buyers will simply be more tempted to buy things from Amazon on the internet.
Best Buy is suffering from the detrimental effects of showrooming. These effects have caused their sales to decrease. Meanwhile, online retailers such as Amazon have seen an increase in sales. To strengthen the power of showrooming, companies have created apps for comparing pricing. These apps affected Best Buy because their prices were too high for customers. To combat these apps and online retailers, Best Buy implemented a price-match policy, where they would match the cost of any product in their store that can be found for a lower price somewhere else. Many negatives came with the price-matching policy. To retain the policy and still see an increase in foot traffic and sales in their stores, Best Buy should focus on creating personal relationships with their customers, ensuring that their inventories are fully stocked, and designing incentive programs for customers who shop inside Best Buy locations.
Overall, due to showrooming’s negative impacts, Best Buy is struggling since its sales have fallen due to these repercussions. Company stores may get around their limited shipping capacity by ensuring their merchandise is always stocked. Customers who frequently purchase online are more likely to visit the store in person to get a better deal. The company will be able to draw and keep more customers while always having the items in stock, which presents an opportunity.
Reference
There’s no business like showroom business. (n.d.). Bouncepad. Web.