Retailers compete with internet

BORIS JANCIC
Last updated 05:00 09/09/2013
Shane Joyce
CHRIS SKELTON/Fairfax NZ
SHANE JOYCE: 'If something is 50 per cent cheaper, of course people will buy it online, but if you can offer them something within 15 or 20 per cent, they will often prefer the safety and reliability of service.'

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It is becoming common to see bargain-hunters trying products in shops and asking staff for advice, only to pull out their smartphone and search for a better price online, according to retailers and researchers.

Labelled "showrooming", this growing trend in consumer behaviour has become a global challenge for retailers, but some New Zealand businesses have changed strategy to keep customers buying in stores.

Owners of Wellington bicycle shop Capital Cycles, Shane Joyce and Paul Davies, said 18 months ago showrooming was becoming noticeable and prompted the company to react.

"You'd be crazy to think it doesn't exist, and to think that just because you do a good job, customers wouldn't want to pay a lower cost," said Davies.

He said a part of their success in dealing with showrooming comes from creating space for shoppers to negotiate price.

"If something is 50 per cent cheaper, of course people will buy it online, but if you can offer them something within 15 or 20 per cent, they will often prefer the safety and reliability of service," said Joyce.

"But not everyone is good at negotiating. You have to create an environment where customers don't feel like they are begging for a discount."

He said they had also begun sourcing products directly from manufacturers to lower prices and had strategically begun bulk-buying goods they knew were likely to be bought online.

"You have to really actively compete with the internet."

Under the current tax regime, goods bought from overseas valued under $400 are exempt from GST. It's something Capital Cycles and the New Zealand Retailers' Association want to see changed.

"It's really something that needs to be done to make the playing field fair," said Davies.

But Coriolis Research managing director Tim Morris said showrooming and a decline in certain kinds of retails stores were inevitable in the changing market.

"Retailing is a dynamic industry that is constantly changing.

"Some products don't make sense to be sold retail anymore."

He said as retail stores moved away from products like consumer electronics, shoppers would replace in-store advice and service with new sources.

"I can go on Amazon, I can read through a hundred user reviews of a product.

"Those are objective and worth more to me than what I get told in a store, a lot of the time."

Morris said New Zealand was only just catching up to a global trend of changing retail structures and the effect was felt more heavily in other countries.

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Grant Sheridan is the general manager of the Betta Electrical Group, a nationwide chain of consumer whiteware and electronics stores.

He said retailers regularly faced awkward situations where customers would compare prices with online retailers while still in the store.

"Where it is incredibly frustrating for a retailer is when someone pulls out a smartphone and looks up the lowest price and says: ‘Match it'.

"You are put on the spot to compete with a company that doesn't offer nearly the same level of service."

He said it was important for consumers to consider a wide range of factors when buying goods, such as the quality of follow-up services, guarantees and expert advice.

- Fairfax Media

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