the Web Chef's e-Bytes

Consumer Behvior - Retail Showrooms, Online Purchases and the Rise of Disintermediation

The Internet Changes Everything! 

We heard this cry for a number of years since the launch of a commercial Internet over ten years ago. 

How true is this when it comes to purchases of big ticket items? 

Are consumers ditching the local, regional or big box retailer for purchases online through channel participants with lower costs and hence lower total prices for acquisition?  If this is the case, the brick and mortar retailers will increasingly become the "free showrooms" where consumers armed with online review information can go and check out the plasma or LCD HDTV they are coveting.  This process is what academics and others call disintermediation or cutting players out of the supply chain when making your purchase.

For example we're in the market for an HDTV this year.  Thanks to a generous retirement gift, my partner can select a television within a certain dollar range.

So what has the purchase process entailed so far?  Like many consumers the purchase follows a range of steps. 

Step 1 - Research HDTVs on Consumer Reports, CNET and through word-of-mouth discussions with current owners

Step 2 - With the selection narrowed down to plasma's in our case, the second step was to go to the regional and big box retail showrooms to see the models that seemed to meet our viewing and budget criteria.  In our market, this meant visits to the the big box stores, Best Buy and Circuit City, along with regional chain American TV. 

Step 3 - We wanted to hear what the sales people had to say about the televisions.  In and of itself this was interesting, given the range of performance, knowledge and selling styles that we encountered.  Our first stop was American TV, a company I've blogged about before.  The first sales rep we encountered there appeared to be knowledgeable telling us that the model we were looking for, a Panasonic Plasma 50, had been replaced by a newer one that they had available.  He knew that the Panasonic we came in to see was a Consumer Reports best buy, so appeared to know his stuff,  He wasn't pushy, condescending or difficult to talk to.  The second stop was Best Buy where we found a nice sales guy in home electronics, who said "let me turn you over to the expert sales person for plasma televisions".  He did so and the guy was very knowledgeable and was even willing to offer us a deal on the television we had decided on.  The television was the original one we had looked for at American TV.  Best Buy had both models and said they were both available, making us question the American TV sales rep's knowledge or "truthiness".  Next stop was a visit to Circuit City.  The store had a noticeable lack of customers compared to either of the other two stores we had visited.  (Maybe their firing of all their top earning sales people is having repercusions after all!)  We found ourselves wandering among the televisions trying to find the Panasonic model we now knew existed without any help.  For a potential puchase of almost $3,000, you'd think there'd be some attention.  We finally found a sales rep, who took us over to the television we were interested and said "here you go, I have to go do some other things" and left us there.  If we had wanted to make a purchase it would have been difficult.  The price was $100 more then the deal Best Buy was willing to give us.  The way the unit was displayed allowed us to compare it to a Hitachi, Toshiba and LG units that were next to it and below it.  This led us to feel confident that the model was a good one that had a more life like color rendition to that of the competitive offerings.  A good thing, since the unit has a price premium.  We decided to return to American TV to see if the model was there and if a different sales rep would take us to it.  We thought this could be a way to support a regional chain that had started in Madison, WI our hometown and had done pretty well for itself.  We ended up with a real jerk of a sales person, who proceeded to demean us by saying that Consumer Reports and CNET reviews are useless and that only audiophile publications are worth following.  He said that the Consumer Report reviews were biased because the reviewers got to keep the televisions at the end, a fact we know to be false given the number of years we've subscribed to Consumer Reports.  His style and approach were extremely off-putting and offensive.  If I had been a secret shopper, I'd have put him on notice with his management team. 

Step 4 - This step actually happened between store visits.  I went online to the Panasonic web site to find the specifications for the model we were considering.  The set was there and was available directly from Panasonic for their list price of $2999.  The specifications confirmed that the unit had the features we wanted and that it would fit in the new piece of furniture we were buying to house it (another shopping tale in itself).

Step 5 - Although the television is a gift and the final price was within the acceptable range, it was at the high end of the range and I wasn't convinced that Best Buy or Circuit City were offering anything more for the money then I could get by shopping online.  I proceeded to three of my favorite shopping comparison sites (PriceGrabber, Mysimon, Shopping) with the model name and number at hand to see what the online retailers had to offer.  Not too surprisingly I was able to find a range of prices for the television including significantly better prices from sites where we had previously made and been happy with big purchases - Buy.com and NewEgg.  The prices ranged from a low of $2209 to a high of $3200.  The Best Buy price would have been $2749, plus tax.  Some online prices included free shipping, some from the national online retailers with brick and mortar locations included the state sales tax.

Step 6 - The purchase decision.  This hasn't been made yet, but for the retail showrooms there is a big red flag, if their business model doesn'f offer some sort of advantage to the online retailers.  If all they are going to do is go to their warehouse load up the tv and drop it in our family room, why should we pay them more than for an online retailer that loads up the television in a remote warehouse, delivers it to our family room and leaves?  The brief conversation with the sales rep isn't enough of a value added differentiator to make the product purchase swing their way. 

My Recommendations
What the local, regional or big box brick and mortar retailers need to do to clench the sale is offer some sort of added incentive to swing the deal their way.  They could offer something like the following:

• Free in home service for a year
• Removal of your old television for free (you now pay for this in Madison)
• Installation for free
• Customer workshops - getting the most out of your HDTV, understanding the home theater
• Purchase from us, we'll donate $xxx to a local charity of your choice    

Needless to say, the process has been interesting and one that offers a lesson for both shopper and retailer as they think through the best ways to connect with their target market.

Customer Reviews on Retail Sites = Better Results

Church of the Customer blogger Ben McConnell references e-Marketer compiled data on social commerce showing that sites with customer review mechanisms demonstrated higher traffic (77%), conversion (56%) and order sizes (42%). 

For more on this topic see my June article in Wisconsin Technology Network "Online Retailing Tango is Adding Some Steps",

Paul Gibler
the Web Chef

Web Tidbits - Web 2.0 and Unethical Behavior

Web 2.0
Statsaholics has an interesting ranking of 952 Web 2.0 Companies sponsored by Seth Godin that ranks them according to their Alexa rank and how it has changed over the past 6 months.  YouTube was number 1 followed by Myspace, Orkut, Wikipedia and eBay.

Seth Godin has a good reminder about the definition of mashups, a term he claims that the mainstream media doesn't "get".  For more on mashups see my article "Would you like your data and (music) mashed?" in Wisconsin Technology Network. 

Ethics and Behavior
Michelle Miller at WonderBranding for Women has an interesting posting linking to an article in the Hartford Courant about Best Buy's Internet shenanigans.  According to her posting the author of the article found that Best Buy had created a dummy intranet site that allowed in-store personnel to rebut claims when told that the BestBuy.com web site had a lower price.  They'd pull up the intranet site showing that the price was higher.  If this story is proven to be true it shows a blatant disregard for ethical behavior in pricing across distribution channels.

Search Engines
Not to be kept in 3rd place, Microsoft has announced a plan to "pay" companies to use Windows Live Search according to a posting in WeirdTechNewsHub.  The plan has Microsoft offering "service or training credits" based on the number searches in a sample of corporations that use Windows Live Search.

SimpleHuman blog had a posting about GoogleGuide, a resource to help you use Google more effectively.

 

WisconsinMade.com for Artisanal Wisconsin Products

I'm a volunteer on the business advisory board for WisconsinMade.com, an internet retailer founded by Linda Remeschatis and her husband to showcase and sell artisanal products from the great state of Wisconsin.  I was quite pleased to see that the business received some well deserved press in a recent Milwaukee Journal Sentinel article "Wisconsin at Your Fingertips". 

If you're looking for gifts now or at any time during the year, I encourage you to visit WisconsinMade.com for a great selection of food and other Wisconsin made items.   

Wisconsin Cheese in Peril?

Cheese heads
Originally uploaded by mistylwhite.

Yahoo News reports that the Wisconsin Cheese industry could be in peril of loosing their "cheesehead" crown to California according to a recent article. California cheese production, at 2.1 billion pounds is rapidly catching up to Wisconsin's 2.4 billion pounds of cheese.

As a long time Wisconsin resident, I'd like to see America's dairy state maintain its leadership not only in quantity, but in quality, diversity and flavor of cheeses. For those of you still looking for cheese gifts this holiday season take a look at the cheese gifts available at WisconsinMade.com. In the spirit of full disclosure, I'm on their business advisory board helping them chart strategies for success.

Tired Tires Shopping Tale Updated

Tired of tires
Originally uploaded by aremac.

A tale of tired tires
Occasionally I'd like to tell a "tale" of my own experiences as a consumer, especially when it intersects with my professional and personal interests in e-business and Internet Marketing.  This tale is about my search for the "perfect" third generation replacement tire and is probably representative of consumer behavior while shopping for a higher price item.

My 2G tires have reached the 50,000+ tread wear date and with a Wisconsin winter on the horizon, I decided it was time to buy new ones.  Not knowing much about tires, I started on my quest for information on which ones I should buy.  My key purchasing criteria was at least a rating of "good" in the snow or on ice traction at a good price.

I had been happy with my Dunlop's, so considered simply replacing them with new ones.  My first thought was let's see what the tire reviewers have to say about these and other tires.  I went to Tire Rack and 1010Tires to find information on consumer reviews of the tires available in my size.

Offline & Back Online for Research
Frustrated and uncertain, I decided to stick with my Dunlop's and use the same local dealer, Holmes Auto & Tire, I had used for the original purchase of the tires.  They told me that the factory was on backorder for at least 8 weeks on this particular tire and that they weren't sure when they'd be available or what the final price would be.  The dealer suggested an alternative in my size, the Yokohama Avid 4HS and suggested that I do some research on the tire.  Back I went to the previously mentioned review and/or retail sites to see what they had to say.  It didn't sound bad and was better on some criteria then my current tire, so I was set to purchase and willing to pay a premium to support my local dealer rather than purchasing over the Internet and using a local installer.  The very day I had made up my mind, the November issue of Consumer Reports arrived in my mailbox with their review of performance all season tires.  "Ah Good" another unbiased review source on potential tires, I said.  Looking down the list, I found that Yokohama's were rated 8th overall, but were rated a "Poor" on ice braking and snow traction, two of the criteria I found most critical in my purchase decision.  "Dang" I said.  It was back to the drawing board.  The top 3 tires were a Dunlop SP Sport 5000, Michelin Pilot Exalto and Falken Ziex ZE 512.

Sears Experience
Meanwhile the Sunday newspaper arrived with an ad from Sears among many others.  Perusing the Sears ad, I see that they are having a tire sale.  Hmmm, I thought, would they have a high rated tire in my size?  The ad referenced the Falken Ziex ZE 512 (# 3 according to Consumer Reports), so I thought sounds good, let me see if my size is made and what the prices for my size are.  I went to the Falken web site and found that my size was one that was made.  I called one of our two local Sears stores and got through to the Auto Center.  The phone was picked up and I was told "I'll be right with you".  Minutes later no action, I hung up.  Mmm what next?  How about Sears.com, supposedly rated one of the best according to the Customer Respect Group's Customer Respect Index.  On my shopping search I went to Sears.com.  Did a search using their site search engine, found Falken tires and my size very easily.  Found that the price was $69.34 per tire, sounded good, but what was the installed price? 

The web site had a statement "this item is available for store pickup and installation at your local Sears Auto Center with no shipping charges.  Click the button below to speak with a customer care advisor to place your order" (see screen shot). I decided to test it out.  I clicked the button and a dialogue box appeared that included my phone number that they'd use to call me or asked me if I wanted to talk to a representative online.  My phone number?  Where did they get that I thought?  I had never purchased anything from Sears.com, I was on a high speed cable connection not a dial-up one or one using DSL.  This triggered some privacy concerns.  The talking to a representative using VOIP sounded worth trying, so I clicked that option.

A nice representative, we'll call her L came on the phone,

L - Can I help you? 
Paul - Yes I want to find out about pricing and availability on tires.
L - What is the Sears item #
P- (Gave her the Sears item #)
L - These are $69.34 each.
Paul  - What is the final installed price?
L - I can't tell you that because the installation prices vary from $30 - $70 across the country.
Paul - So why would I order through you, when I don't know the final price?
L - We have different prices then the stores do
Paul - Sorry it seems like I'd be better off going directly to the store for availability, pricing and to schedule installation.
L - We're working on getting our systems better.
Paul - Thanks for your help, I'm going to call the store.

I called the store and found that they were quoting $74.09 a tire, but they did tell me what the final installed price would be....

Moral of the Story
Given the length of this posting, I thought it would be worth sharing what I think this means for an e-business today.

• Think about how your consumers shop
• Evaluate what type of searching behavior they are undertaking
• Consider what product reviews they are looking at
• Integrate your offline and online channels to simplify the purchasing process
• Consider a web site audit that looks at the user interface
• Continue to experiment with new technologies like VOIP customer service or live chat
• Facilitate your consumer's shopping experience with product visualization techniques like product zoom or product rotate

Needless to say, I still haven't made my appointment for my new tires, but suspect that it will be through the bricks rather than clicks channel at Sears Auto Centers.

UPDATE - 10.25.06
Having made up my mind to go with the Falken's, I called Sears Auto Center at West Towne, here in Madison, WI USA.  The man I talked to told me that while Consumer Reports might rate them highly, that they had quite a few complaints from customers about their performance in the snow!  Given that this was one of my chief criteria, I decided to believe him.  I asked him what he would recommend.  He told me a Goodyear (don't remember the model though).  I hadn't seen any research leading me toward a Goodyear, although I'd like to support an American manufacturer, so I asked him how about the Bridgestone Potenza G0009, another tire I had researched and been considering.  He grudgingly said that was a pretty good tire.  I asked for the price and he told me $447.07 installed.  I told him I was going to do some research.  Needless to say I already had a price quote from Comstock Tire here in Madison of $99 per tire or $396, so thought I'd go there.  I went to their website to get the phone number again and was nosing around and found a coupon for $20 off 4 new tires, so was even happier with my decision. 

Today I took the plunge, had the Potenza's installed, an oil change and my brakes checked at Comstock. 

So the new tires are finally on!

Wide Bottoms fits on Long Tail - Retail Customization

Mass Customization & Open Innovation News has an interesting review of a new site for the customization of women's jeans called Zafu.  According to a review of CNN press coverage on the blog, the site asks women 11 questions to help them in getting the correct size of jeans.  Zafu in turn serves as the market intermediary matching the respondents answers with a database of thousands of jeans inventoried at multiple online retailers.  They direct the respondent to the appropriate vendor and receive a fee for each sale. 

Online Retailing

Progressive Grocer reports that Amazon.com has announced the launching of their online grocery store.  The store reportedly has 14,000 dry grocery products.  During beta testing over 200,000 customers tested the new retailing venture. Half the stores merchandise is said to be organic or natural.

Internet Retailer reports that Zappos.com sales grew 62.1% to 600 million.  These results place the site # 34 on Internet Retailer's top 500 sites. Zappos is a retailer of shoes with a tagline claiming to be "the web's most popular shoe store".  They offer free shipping for purchases and returns.  In addition they carry a large selection of hard to find sizes capitalizing on the inventory benefits of an online retailer.