Will ‘Showrooming’ Define Retail’s Next Era?

Consumers have gotten the taste of eCommerce in their mouths, and there’s no going back. The Covid-inflicted necessity to order things online versus going to the store has forced new habits that could sustain semi-permanently. We can’t unring that bell.

To put some numbers against that claim, eCommerce in 2020 grew 32 percent year-over-year as of Q3. After hovering around 10 percent of U.S. consumer spending for the past decade, it shot up to 14 percent in a matter of months. The question is if it stays there.

First, we’ll pause for definitions. “eCommerce” includes the traditional definition of ordering things online to be shipped. But our focus on local commerce broadens the scope to any locally fulfilled transaction, including order-ahead and curbside pickup.

How Much Will eCommerce Grow in FY 2020?

Experience Hubs

Back to the question of eCommerce’s long-term prevalence, this will directly impact the fate of physical retail. If we envision for the sake of argument that eCommerce sustains current spending levels, how will physical stores need to evolve to live in that world?

This was a question explored this week by Fast Company. The idea is that if eCommerce continues to siphon off a large portion of retail spending in a post-Covid world, physical stores can reposition themselves in that value chain. They can be brand experience hubs.

In other words, though consumers have gotten savvy with, and interested in, online ordering for most products, there’s still a need for upper-funnel branding and awareness marketing. That’s where stores can play a role as discovery engines for products or brand ethos.

This “showrooming” model isn’t new, which means there are plenty of examples. Apple is probably the best model of an experiential retail play. Other examples go back further, including Sharper Image. And the DTC world has been all over this, including Away and Casper.

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Local Showrooming

The examples above are mostly large brands, which need to establish and reinforce narratives on a broad scale. But what about SMBs? Will this trend trickle down to them, as sometimes happens with emerging tech & media trends? The answer is maybe.

For one, the experiential brand hub model applies to consumer goods, as opposed to SMB verticals like restaurants, salons and professional services. Your dentist doesn’t need a Sharper Image-esque store (although Invisalign may). Even retail categories like hardware don’t jive.

So where does it apply? It could gain momentum for considered purchases like automobiles. Auto dealers are in the meaty mid-market segment (the “M” in SMB), which could be compelled towards Carvana-like fulfillment models in tandem with local showrooms.

Regardless of the model’s looming impact on SMBs (or lack thereof), it’s a noteworthy thought exercise and a phenomenon that anyone in the local commerce and SMB SaaS worlds should keep an eye on. 2021 will be an uncertain year but we’ll watch this closely.

This is the latest in Localogy’s ‘Skate To Where the Puck is Going’ series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving.

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