June 26, 2012

Showrooming Example: Logitech and Best Buy

It's trendy to think that everybody is standing in stores, reviewing merchandise, then using mobile devices to check prices.  Immediately after checking prices, the customer walks out of the store to hurry home and buy a comparable item online ... or worse, to magically buy via a mobile device from a competitor while standing in a store.

But this logic is mudheaded, for the simple reason that the customer has no reason to even bother with showrooming when prices are comparable.

Here's a quick poll for loyal readers of The MineThatData Blog.  Which price would you prefer to pay for this item?
  • Choice A = $194.00.
  • Choice B = $147.49.
This is a common-sense pricing issue.  Common-sense pricing issues have been around for thousands of years.

Simply put:

  • Logitech + Tiger Direct + Amazon Vendor Relationships > Logitech + Best Buy Vendor Relationships.
In other words, somebody at Best Buy is unable to negotiate contracts with Logitech that are as price friendly as the people at Tiger Direct, who seemingly get better pricing from Logitech and then negotiate a good deal with Amazon.  I mean, do we really believe that Best Buy is so dumb that nobody at Best Buy ever asked Logitech for permission to have price parity with online brands?

In one case, three companies take home $10 each from younger customers who are price sensitive... in the other case, two companies take home $35 each from older customers who do not use technology to compare prices.

There are four companies involved in this comparison.
  1. Logitech.
  2. Tiger Direct.
  3. Amazon.
  4. Best Buy.
Only one of the companies is being run into the ground, and Logitech is helping dig the grave.

This is not a showrooming issue.

This is an issue of offline/online price negotiations between vendors, causing customers to exhibit behavior that makes sure the customer isn't ripped off by one set of price negotiations.

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