Thanks to Mobile, Retail Stores Are Reduced to Online Showrooms

Last Updated Dec 23, 2010 4:27 PM EST


Editor's Note: to see our infographic slideshow on Retail Shopping in 2015, click here.
Online commerce is becoming astonishingly efficient -- and the list of disruptors is only getting longer. Before long, consumers will be able to compare prices, inventory and retailers locally and online, all in real-time. The newest barrier to fall: price.

First, the background: Intuit (INTU) is perhaps the most powerful actor working towards price transparency. Last month it began using its Mint.com data to show users what their neighbors are paying at local stores, so users can compare which are (on average) more or less expensive. And startups like Milo.com are aiming to make local stores' inventory searchable on the Web, so you know if the local Best Buy (BBY) has that new-model TV you want. Now a new service called Gazaro is tackling the element of price.

Gazaro is a real-time price search engine. It's styling itself as consistent in spirit with Google's (GOOG) new real-time "Instant" search, which was rolled out at around the same time. Gazaro's founder, Alexander Rink, contends that the price data on typical price-comparison sites (like Google Shopping) are frequently out of date, and in this shopper's anectdotal experience, he's right: most comparison shopping data feels unreliable at best.

Gazaro's system, which it calls LivePrice, updates prices (as well as product descriptions) every few seconds, and is applicable mostly to consumer electronics and computer hardware, where store margins are already razor-thin. Right now, Gazaro.com is most useful on a desktop computer, but Rink says the company will be bringing out "some new innovations on the mobile front" for Black Friday.

That will "place greater pressure on pure bricks-and-mortar retailers to compete," Rink says. "Blockbuster's recent bankruptcy filing and Barnes & Noble's putting itself up for sale are a couple of the more visible examples of that trend."

Eventually, retailers like Amazon (AMZN) and Google will probably jump into real-time price comparisons too. For products that are unwieldy or especially heavy -- TVs, computers, some printers -- there is already tremendous appeal in having your item delivered to your home. But since consumers also like seeing these devices in real life before buying, the transition to online won't be totally binary. Instead, we may end up with more "showroom" retail scenarios, in which consumers walk into a brick-and-mortar store to check out look-and-feel, and then go home and buy the item online.

Brick-and-mortar retailers realize that this scenario is on the horizon, which is why many of them have built mobile sites that are meant to be used as in-store companions. In July, I wrote about a company called Usablenet that develops e-commerce mobile sites for major clients like Amtrak, Bloomingdales, Crate & Barrel, Brookstone, Sears (SHLD) and American Eagle (AEO). Their VP of Global Product Strategy told me back then:

The interesting thing about mobile is this ability that supports both environments: real-world and online. Most of our clients are taking the stance that they should bring some of that Web knowledge into stores -- reviews, gift registry, mobile gift cards -- and a lot of attention on the mobile front is the ability to create and share a wish-list [while in the store].
Ebay (EBAY) is also hoping that shoppers will use their mobile phones while walking around the mall -- except they're hoping we fire up eBay's mobile app, not the retailers'. In September, eBay's VP of mobile told me:
We expect people to sit in brick-and-mortar stores and comparison shop [with eBay Mobile] and we expect to be a partner for those stores.
This puts SMBs -- and larger retailers too -- in something of a pickle. If users are shopping in store and then buying online, then brick-and-mortar retail stores are relegated to just show-and-tell (that's the "showroom" retail scenario).

This isn't good news for stores. Online shopping has much less lock-in than real-life shopping does. If you can see a TV in Best Buy and then comparison shop on eBay or Gazaro from your phone, you're just as likely to click "Buy" on an item from, say, Amazon. Big-box retail stores could become big overhead expenses that don't contribute much in return, at least for electronics.

One weapon against this transparency is group buying, which brick-and-mortars can use to spread the word about discounts or coupons that undercut the prices surfaced by search engines like Gazaro. Whether group buying tools like LivingSocial can help stores take the power back remains to be seen.

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