'Showrooming' and the Competition between Store and Online Retailers
Indian School of Business (ISB), Hyderabad
Texas A&M University - Mays Business School
Jagmohan S. Raju
University of Pennsylvania - Marketing Department
January 14, 2013
Customers often evaluate products at brick-and-mortar stores to identify their "best fit" product, but end up buying this product not at the store but at a competing online retailer to take advantage of lower prices. This free-riding behavior by customers is referred to as "showrooming." We analyze three strategies to counter the effect of showrooming that may improve profits for the brick-and-mortar stores: (a) price matching, (b) making product matching harder between the brick-and-mortar store and the online retailer, and (c) charging customers for showrooming. We show that only the last two strategies may improve profits of the brick-and-mortar stores. We also present an analysis to illustrate when a particular strategy, (b) or (c), does better than the other.
Number of Pages in PDF File: 37
Keywords: retailing, showrooming, competition, pricing, game theory, competitive strategy
JEL Classification: L81, M31, C72, D43
Date posted: January 15, 2013 ; Last revised: August 22, 2014
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