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there appeared to be knowledgeable telling us that the model we were looking for, a Panasonic Plasma 50, had been replaced by a newer one that they had available.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.
