Using technology against technology can also be a winning strategy for bricks-and-mortar retailers against online sellers.
Matt Norcross has been selling books for two decades, but lately he must contend with readers who go to his Petoskey, Mich., shop to see and touch the printed works he offers, only to buy them later from Amazon.com at a savings.
Even if he offers the books at the exact same price, shoppers can save 6 percent by not paying sales tax online. “Our store is being used as a selling tool for online retailers,” said Norcross, the owner of McLean & Eakin Booksellers. A few days ago, he added, he even caught a shopper taking pictures of recipes to avoid buying a cookbook. “Bricks-and-mortar stores can’t continue that way.”
To address this trend, which the retail industry calls showrooming, small stores like McLean & Eakin are increasingly touting their personal service. Other retailers, including national chains, are offering price matching — and bringing more technology, such as iPads, computer kiosks and digital codes for scanning, to their shops to direct people to their online sites.
In an attempt to curb tax-free online shopping, the U.S. Senate passed the Marketplace Fairness Act earlier this month. The vote was 69-27, with opponents of the bill arguing that the legislation makes it harder for online businesses to sell in multiple states. It was sent to the House for consideration.
Forty-five states and the District of Columbia require customers to pay sales tax. But unless an online retailer has a bricks-and-mortar store or office on the ground in a state, it doesn’t have to collect the sales taxes. And while customers are still supposed to pay the tax when they file their state income tax returns, many don’t.
“Someone who’s strictly driven by price will come in and take advantage,” said Bo Brines, the owner of Little Forks Outfitters, an outdoors retailer in Midland, Mich. “Add that to a lack of a level playing field by not having to collect sales tax, and it’s a potent combination.”
A recent study, by Seattle-based group Placed, found 40 percent of the shoppers participated in showrooming and concluded the threat to retailers may be more serious than they realize. The study was based on survey results from nearly 15,000 people.
In addition to Best Buy and Target, the study found other national retailers, including Bed Bath & Beyond, PetSmart, Toys ‘R’ Us, Sears, Barnes & Noble, Kohl’s, J.C. Penney — even discount warehouse Costco — were at risk.
“There will be more showrooming,” Placed founder and CEO David Shim predicted. “Now, it’s as simple as ‘I’m going to open an app.’ ”
Some retailers — such as Best Buy and Target — started offering to match online prices to combat showrooming.
But competitive pricing is only part of the problem.
“Customers come in and look at the merchandise. Oftentimes they tie up an associate’s time for 10, 15, 20 minutes — and then they go buy the product on the Internet,” said Tom Scott, senior vice president of the Michigan Retailers Association. “The ruder ones take their phones out right in the store.”
Gorman’s President Tom Lias has a long list of reasons why shopping online can’t match the experience of shopping in the five Gorman’s Furniture stores in Michigan.
Among them, he said, are the choices, customization and service that customers get when they walk in the store, and being able to rely on the company.
Lias said he’s also encouraging his employees to accept technology: They’re using e-mail and social media to keep in touch with customers. Some are now carrying iPads.
And the stores have computer kiosks that customers can use to price and shop certain furniture brands. “Customers want what they want, when they want it,” he said.