Does web-rooming hurt online retailers more than show-rooming hurts physical stores

Answer: Yes. I think that on balance, web-rooming hurts online stores more than show-rooming hurts brick and mortar retailers. That is because the vast majority of shoppers are brick and mortar customers and percentage rates of show-rooming and web-rooming are equal.

Web-Rooming Happens 14 Times as Much as Show-Rooming

Here in Colorado and many other US states, there’s been a lot of controversy surrounding laws and proposed legislation charging sales tax on all online retail purchases regardless of whether the customer lives in your state or not.

One of the oft-cited statistics used to justify a sales tax on online purchases is that 63% of shoppers will look at merchandise in the store but then go home, get online, price-shop and complete their purchase. This phenomena is known as show-rooming.

I believe that web-rooming, which is the reverse funnel, where a shopper browses online but goes to a store to complete the purchase, happens 14 times as much as show-rooming and that brick and mortar stores enjoy a huge Free Lunch from marketing provided by online stores.

Sixty-five percent of shoppers reported web-rooming (vs. 63% show-rooming). That might look like a wash, which in itself would be news to most of the politicians and media outlets demonizing the online channel for dodging sales tax.  But it’s worse for your online store, when you consider that only 6.8 percent of retail sales actually occur online. You could infer overall that the vast majority of shoppers are dedicated brick and mortar customers.  In fact, in the last three month of 2013, total retail sales were over a trillion dollars in the US, with “just” $69 billion of those happening online. Or about 6.8% of total sales.

This seems like a classic case of false equivalence where an apples-to-apples comparison is made when in truth it doesn’t exist. Given that web-rooming and show-rooming happen at similar rates, you need to look at the full sample size of shoppers. There are 14 times the amount of brick and mortar shoppers as there are online shoppers!

Based on these statistics and informal surveys of how people shop, web-rooming happens 14 times for every one time a shopper show-rooms.

While retailer associations support Marketplace Fairness and ending the internet tax holiday, I think brick and mortar retailers are going to be very disappointed by the results of these laws, states are not going to collect nearly as much revenue as they thought and a huge opportunity exists to explore new ways of being both online and local.

Small, independent stores in your town that are advocating “Amazon laws,” as they have become known,  don’t see that Amazon, Google, Apple and the others are starting to circle back and establish local locations, as are many small online retailers.  Just as mom and pop stores didn’t adjust to the franchise revolution or the Big-Box revolution, they don’t seem to be adjusting to the Multi-Channel revolution!

I urge you to think about your niche and how it fits into the above numbers. Grocery store purchases probably have a 99% web-rooming audience since nearly no one buys groceries online, but in consumer electronics,  the effect of show-rooming probably hurts physical retailers more than other retail categories.

To me, over the next decade, the lines between physical and online store will blur, and a successful store will operate both ways seamlessly. Sales tax reform won’t solve that for the out-of-touch retailer.