showrooming and-consumer-migration

TABLE OF CONTENTS BACKGROUND Purpose What is “Showrooming?” Analytics that Inform & Empower Methodology Category Definitions

FINDINGS Best Buy: Consumer Expectations of In-Store Shopping How And Why Best Buy Customers Shop at Amazon

KEY TAKEAWAYS Best Buy: Expectations Reveal Opportunities for Action NEXT STEPS Opportunities to Differentiate Expectations at Your Retail Locations

BACKGROUND Purpose, Methodology, and Category Definitions

PURPOSE

With several major retail clients, the growing popularity of consumer “showrooming” piqued our interest at Crimson Hexagon. We were curious: how can we leverage online consumer opinion to address this major industry-wide challenge?

Through deep analysis of social data, we seek to discover opportunities for retailers to fight back against “showrooming” and keep customers in-store. We discuss our research findings, and explain the implications for retailers.

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WHAT IS “SHOWROOMING?”

DEFINITION Showrooming occurs when a consumer examines merchandise in a brick and mortar retail store and takes advantage of free staff expertise and other store intangibles, but ends up purchasing the items online—often for a lower price.

With the ease of mobile price checks and online product comparisons, traditional brick and mortar (B&M) retailers have fallen victim to the showrooming phenomenon. However, the main consequence of showrooming is one which all retailers can relate to: customer loss. Even manufacturer-owned retailers must understand the motives some customers have for switching to other B&M and online competitors.

In a competitive environment where retailers vie over content and keywords— where disappointed consumers find solace in typing six letters into their smartphone’s web browser: A-M-A-Z-O-N— deep knowledge of consumer expectations is a retailer’s most powerful weapon against showrooming.

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ANALYTICS THAT INFORM & EMPOWER

Crimson Hexagon is uniquely effective in analyzing and interpreting conversation related to “showrooming” and customer migration. To conduct this study, we had to dig deeper than basic sentiment classifications to accurately discern consumer expectations and motivations. By linking these nuanced opinions to our strategic research objective, Crimson Hexagon delivers social intelligence about this current challenge facing retailers.

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METHODOLOGY

Using the Crimson Hexagon ForSight™ platform, we analyzed the social conversation around two major retail competitors throughout 2011. For the purpose of this study, we used the case of Best Buy and Amazon as a proxy for retailers affected by this phenomenon. We found over 1.5 million on-topic posts within our social media data library about these retailers.

We developed a two-part framework for our analysis: I. Consumer Expectations of In-Store Shopping

•  We uncovered, quantified, and tracked consumer expectations of shopping in-store at Best Buy.

II. Competitor Store Appeal

•  We uncovered, quantified, and tracked how and why Best Buy customers shop at Amazon.

When combined, the insights and trend data from these analyses can provide retailers (both e-tailers and B&Ms) with opportunities to improve customer retention.

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METHODOLOGY: I. CONSUMER EXPECTATIONS OF IN-STORE SHOPPING

Keywords: We collected posts from blogs, forums, Facebook, and Twitter that mentioned Best Buy in various forms (simple mentions, common misspellings and abbreviations, hashtags and @replies). To help us find the most substantive commentary, we excluded posts that included links (as they tend to be spam). We trained ForSight to understand distinct consumer expectations in online conversation about in-store shopping at Best Buy.

How we discerned consumer expectations for this study: Expectations may be explicitly stated in posts by consumers, inferred from an expressed reason for going to a store, inferred from explicit disappointment with a particular shopping experience, or by explicit acknowledgment of a friend’s testimonial or shopping recommendation.

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METHODOLOGY: I. CONSUMER EXPECTATIONS OF IN-STORE SHOPPING

Expectations were organized into four relevant groupings and one irrelevant grouping, each with assigned categories. The following logic was used to classify posts across the categories listed below: Shopping Experience •  Pleasant and painless shopping: Expectation that shopping and check out in store will be easy and stress-free; don’t have

to wait in long lines, navigate through large crowds, etc. •  Social gratification and peer support: Expectation that going to a Best Buy store with friends and family will be a socially

gratifying experience; it is fun and valuable to shop with others. Service •  Pre-sale service: Expectation of customer service and a helpful sales staff when shopping at Best Buy. •  Post-sale service: Expectation of product exchanges, and repairs, installations etc. with Geek Squad at Best Buy. •  Price-matching fulfillment: Expectation that Best Buy will match competitors’ prices in store. Store Convenience & Availability •  Product I want in stock: Expectation that Best Buy will have desired items in store inventory. •  Wide product selection: Expectation that Best Buy has a large product assortment to choose from in store. •  Sample products on display: Expectation that products at Best Buy can be tested prior to purchase; ability to personally

examine the look, feel, and functionality of items. •  Pick up online orders and pre-orders: Expectation of ability to pick up previously ordered items in store. Value •  In-store Deals: Expectation of store sales and promotions at Best Buy. Irrelevant •  Irrelevant: Posts that included a keyword but were off-topic (like financial news, FourSquare check-ins without additional

commentary) or spam; conversation regarding Best Buy’s advertisements and online store were also excluded from the analysis.

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METHODOLOGY: II. COMPETITOR STORE APPEAL

Keywords: We collected posts from Facebook and Twitter that mentioned Best Buy and Amazon in various forms (simple mentions, common misspellings and abbreviations, hashtags and @replies). To help us find the most substantive commentary, we excluded posts that included links (as they tend to be spam). We trained ForSight to understand nuances in online discussion where Best Buy is referenced in the context of Amazon; specifically, consumer dialogue expressing reasons the online retailer is superior to Best Buy and why they want to leave Best Buy.

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METHODOLOGY: II. COMPETITOR STORE APPEAL

Conversational themes about the migration from Best Buy were organized into five relevant groupings and one irrelevant grouping, each with assigned categories. The following logic was used to classify posts across the categories listed below: Using Best Buy to Shop at Amazon •  Best Buy is just a showroom for Amazon: Explicit acknowledgement that Best Buy is where the consumer goes to sample products,

which he or she will then buy on Amazon.

•  Best Buy sells Amazon gift cards: Practice of using Best Buy gift cards to purchase Amazon gift cards at a Best Buy store.

Shopping Experience

•  I don’t like long lines and big crowds at Best Buy: Switching to Amazon because of general inconvenience, displeasure when shopping at Best Buy, and long waits for checkout.

•  General issues with Bestbuy.com: General displeasure when shopping on Bestbuy.com, problems with functionality, and pricing errors.

Service

•  Poor customer service at Best Buy: Switching to Amazon because of dissatisfaction with customer service at Best Buy.

•  Best Buy won’t price-match: Leaving Best Buy because the store will not offer a price-match.

Store Convenience & Availability

•  Best Buy doesn’t have products I want in stock: Switching to Amazon because instant gratification could not be achieved at Best Buy.

•  Order fulfillment delays from Bestbuy.com: Dissatisfaction with online orders, processing times, and shipping cancellations.

Value

•  Amazon has better deals: Switching to Amazon because of savings on products, shipping, and sales tax.

Irrelevant

•  Irrelevant: Posts that included a keyword but were off-topic (like financial news, FourSquare check-ins without additional commentary) or spam; general chatter about brands, discussion of advertisements, and preferences for Best Buy over Amazon were also excluded from the analysis.

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FINDINGS OUR FORSIGHT ANALYSIS RESULTS

BEST BUY CONSUMER EXPECTATIONS OF IN-STORE SHOPPING

INSTANT GRATIFICATION STILL MATTERS

Best Buy: Consumer Expectations of In-Store Shopping (1/1/11 – 12/31/11) � 1,501,777 opinions

Store convenience & product availability (32%) at B&M stores continue to appeal to shoppers. 14

PROMISE OF CUSTOMER SERVICE LOSES ITS APPEAL


Customer service (9%) only represents a minor shopping incentive, despite availability of sales reps. 15

CONSUMERS ANTICIPATE SEASONAL DEALS

Store deals are most anticipated with holiday shopping from mid-November to early December (15%).


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CONSUMERS ANTICIPATE SEASONAL DEALS

Expectation of in-store deals is lowest from mid-July to early August, at less than 2.5%.


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SOCIAL MOTIVATIONS ARE LARGEST DRIVER OF IN-STORE SHOPPING

The prime expectation (46%) is a “playground” experience: it is fun and helpful to shop with others.

“@ohhellofriend hittin up best buy

with the hubs and friends!” -@Bri_Kim

“Who knew best Buy would be

soo much fun!!!” -@BExclusives


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AMAZON HOW AND WHY BEST BUY CUSTOMERS SHOP AT AMAZON

AMAZON OFFERS COST SAVINGS VS. BEST BUY

How and Why Best Buy Customers Shop at Amazon (10/1/11 – 12/31/11) � 4,770 opinions

A large proportion of customers are simply deal seekers (27%) who highly value Amazon’s lower prices. 20

AMAZON HAS AMPLE INVENTORY VS. BEST BUY

If instant gratification at Best Buy is not possible, many consumers turn to Amazon (10%).

“@LILBLAZE I had to cop that album off amazon…Best Buy

around ain’t stocking that album..I was so pissed off when I got

there last night” -@joeybrabham

“How is Best Buy still in business? They

can’t even tell me if something is in stock.

Amazon is going to finish them off” -@LA_Rabbit1


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CONSUMERS TRUST AMAZON TO FULFILL HOLIDAY ORDERS VS. BEST BUY

Long processing times and order cancellations frustrated Best Buy customers, peaking to 23% on Dec. 25.


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AMAZON SHOPPING IS FACILITATED AT BEST BUY

Over 60% of conversation involves using Best Buy gift cards to purchase Amazon gift cards on Dec. 31.

“Christmas pro tip: Best Buy gift cards can

be used to purchase Amazon gift cards.”

-@akshaun

“Going to Best Buy to trade in 23 games for $400 with 60% bonus. Then I’ll use that gift

card for Amazon credit lol thanks bb suckers”

-@sukTHEfac


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CUSTOMERS ARE CANDID ABOUT THE PRACTICE OF SHOWROOMING

Nearly 30% of conversation explicitly acknowledges Best Buy as a showroom for Amazon.

“I love @BestBuy. It is the perfect showroom

for everything I buy from @Amazon.”

-@djaniak

“@samj @jpmorgenthal I rarely buy from brick and

mortar, but do go view products at places like

#BestBuy before buying from #Amazon.”

-@jonisick


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SHOWROOMING DISCUSSION PEAKS AROUND HOLIDAYS

Discussion of Best Buy as a showroom grows from 6% to 34% in the weeks leading up to Black Friday.


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34%

6%

SHOWROOMING DISCUSSION PEAKS AROUND HOLIDAYS

Discussion spikes in the days prior to Black Friday (44%), and two weeks before Christmas (42%).


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BEST BUY AND AMAZON KEY TAKEAWAYS

IN-STORE EXPECTATIONS ARE MORE DIVERSE THAN INSTANT GRATIFICATION

I.  Expectation of a “playground” experience at Best Buy creates a major long-term opportunity to combat showrooming.

II.  The holiday season provides a unique opportunity for Best Buy to

proactively address showrooming and the Amazon threat. III.  During the holidays, customer frustrations with store inventory and

online order fulfillment highlight an opportunity for retention. IV.  Expectation of in-store deals is highly seasonal, revealing new

opportunities for store promotions in the summer. V.  The practice of using Best Buy gift cards to purchase Amazon gift

cards presents an opportunity to refocus and recapture customers.

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EXPECTATIONS AT BEST BUY REVEAL OPPORTUNITIES FOR ACTION: SHOPPING EXPERIENCE

I.  There is a major long-term opportunity for Best Buy to leverage its appeal as a “playground” destination. •  The consumer’s prime expectation of social gratification and peer support (46%)

presents Best Buy with its greatest opportunity to combat showrooming.

•  By coupling its product showroom attraction with fun, in-store activities, Best Buy has a unique opportunity to foster social shopping at its retail locations.

•  Best Buy can create special programs centering on a specific product or service offering, such as: •  Special store events

•  Group promotions

•  Challenges and competitions

•  Mobile initiatives

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EXPECTATIONS AT BEST BUY REVEAL OPPORTUNITIES FOR ACTION: HOLIDAY SHOPPING EXPERIENCE

II.  As the risk of Amazon migration is highest during the holidays, this season represents a prime opportunity for Best Buy to address Amazon and showrooming head-on. •  In the weeks leading up to Black Friday, the showrooming discussion increases

almost 6x.

•  Best Buy can create special programs and offers specifically designed to keep customers from shopping at Amazon, such as: •  Publicized price-matching opportunities

•  An award of store gift cards with purchase from Bestbuy.com

•  Refer-A-Friend programs

•  Programs like these help capitalize on consumers’ prime expectation of social gratification and peer support at Best Buy.

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EXPECTATIONS AT BEST BUY REVEAL OPPORTUNITIES FOR ACTION: STORE CONVENIENCE & AVAILABILITY

III.  Best Buy has an opportunity to assuage customer frustrations with store inventory levels and online order fulfillment during the holidays. •  Best Buy can promote a guaranteed delivery of products ordered by a certain date.

•  Best Buy can provide consumers with the option to view the precise number of items in stock at each retail location via Bestbuy.com; if the inventory levels are accurate, this may help reduce customer dissatisfaction and migration.

•  Best Buy can train store employees to guide customers to Bestbuy.com and other nearby locations for out-of-stock items.

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EXPECTATIONS AT BEST BUY REVEAL OPPORTUNITIES FOR ACTION: VALUE

IV.  Best Buy can surprise and capture customers by creating and publicizing mid-summer store promotions before the competitive back-to-school sales cycle. •  From mid-July to early August, less than 2.5% of the conversation revolves around

an expectation of deals when shopping in-store at Best Buy.

V.  Best Buy has an opportunity to reduce the availability of Amazon gift cards at its retail locations, and refocus customers on the value of Best Buy products and services. •  After Christmas, discussion regarding use of Best Buy gift cards to purchase Amazon gift

cards grew steadily, peaking to 60% of the conversation on Dec. 31.

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BEST BUY AND AMAZON NEXT STEPS

OPPORTUNITIES TO DIFFERENTIATE

Showrooming and consumer migration are phenomena that every retailer must address proactively. At present, a tremendous opportunity for retailers to combat this behavior lies in discovering and understanding the nuances of consumer opinion in social data.

Deep knowledge of store-specific expectations and consumer migration patterns can inform each retailer’s strategy to reduce showrooming and customer loss. It may even unearth opportunities for new product and service offerings, and in-store activities to improve the customer experience.

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OPPORTUNITIES TO DIFFERENTIATE

What’s more, an investigation of consumer expectations may create opportunities for a surprise. When something unexpected and memorable occurs in-store, it can stimulate positive conversation on social media and likely encourage repeat store visits and purchases.

Findings like these can fuel a retailer’s marketing vehicles, empowering the organization to manage and capitalize on prevailing consumer requirements.

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EXPECTATIONS AT YOUR RETAIL LOCATIONS

•  How do your customers expect to benefit from shopping

in-store? How do these requirements shift over time?

•  What drives your customers to the competition?

•  How do customer expectations and priorities differ when shopping at

each retailer?

•  What is the best way to address prevailing expectations? Are there

any customer needs that are not currently served?

•  What makes your store experience unique and memorable?

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CRIMSON HEXAGON Crimson Hexagon, founded in 2007, is the leading global provider of social media analysis software that delivers business intelligence for brands and market research professionals. Powered by patented technology developed at Harvard University’s Institute for Quantitative Social Science, the Crimson Hexagon ForSight™ platform overcomes the limits of traditional market research by delivering a real-time view of how engaged online consumers truly think and feel about a brand or issue. For more information, visit crimsonhexagon.com

showrooming and-consumer-migration

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