Study seeks to quantify the ‘Amazon Effect’

In the fast changing world of omnichannel retailing, brick and mortar giants like Wal-Mart Stores Inc. have made forward leaps in the past year to woo digital shoppers away from online magnate Amazon.

A new study released by Placed Inc. on Thursday (Feb. 28) seeks to quantify the impact of Amazon on brick-and-mortar retailers and yields some surprising results along with the expected casualties of the "showrooming" phenomenon – where shoppers visit a brick and mortar store to check out a product then shop and make the purchase online.

“The study clearly shows that showrooming is more than media hype and a real problem that retailers need to address. By putting a number to showrooming, retailers can start to better understand the impact, and take action based on data versus anecdotes and assumptions," said David Shim, founder and CEO of Placed.

Though Best Buy and Target ranked in the top 8 by retail risk, it's specialty retailers Bed Bath & Beyond and PetSmart which top the list, according to the 10-page study.

The Aisle to Amazon Study highlights one’s ability to connect the digital and physical worlds through mobile devices. The study sought to find out where Amazon customers shop in the physical world regardless of showrooming habits.

Headlining the list, 25.2% of Amazon customers visited a Walmart store in January, followed by 10.7% shopping Target, 7.7% also choosing Walgreens and Best Buy gleaning 4.8%. These results are not too surprising given Wal-Mart is the nation’s largest grocery chain with some 4,000 stores.

The study also segmented Amazon customer by their spending levels. Consumers who spent $100 in the past three months at Amazon also showed a propensity to visit a warehouse club. Roughly 52% of Amazon customers said they also shopped at Costco.

Analysts say this is not unexpected as warehouse shoppers have a higher median income than those consumers shopping discounters such as Wal-Mart and Dollar General.

Costco members for instance have a household income of $96,000, compared to $60,000 for Target and $40,000 for Wal-Mart, according to Chris Horvers, retail analyst with J.P. Morgan.

Other brick and mortar retailers attracting Amazon big spenders in January include Victoria’s Secret, T.J. Maxx. PetSmart,Target and Bed Bath & Beyond.

Wal-Mart did not make this list, according to the study which surveyed roughly 15,000 respondents.

SHOWROOMING AISLES
The threat of showrooming has frustrated big box giants in the past. Best Buy and Target have announced permanent Amazon price matching policies since the start of this year to combat showrooming.

The results from the study confirm these retailers face some of the strongest threats of showrooming in their aisles. Showroomers were 20% more likely to visit Best Buy than an average consumer and 15% more likely to visit Target.

“We are very pleased with our digital channels, as online and mobile sales grew faster than industry averages," Target CEO Greg Steinhafel said during the Feb. 27 earnings call. "As a result of our efforts to improve the website throughout 2012, key performance metrics are meaningfully improved, and our mobile sales and traffic are growing at a triple-digit pace off a much smaller base.”

“Following the launch of free wireless in all of our stores in the fourth quarter, Target.com was, by far, the site most commonly accessed by guests while they were shopping in our stores,” he said.

Target plans to continue investing in a robust multichannel experience this year for its customers and says mobile purchases now constitute more than 7% of its digital sales, and mobile traffic is now more than 25% of the retailer’s overall digital traffic.

Walmart, which does not price match Amazon, was the relative “safest” of the three retailers with showroomers. The study found showroomers were 10% less likely to visit Walmart compared to Target and 15% less likely compared to Best Buy.

In fact, several other specialty retailers face a stronger threat of showrooming, according to the study.

Bed Bath & Beyond ranked as the most at-risk retailer with showroomers – 27% more likely to visit the home goods retailer. The top 5 at-risk retailers were rounded out by PetSmart (25%), Toy ‘R’ Us (21%), Best Buy (20%) and Sears (19%).

AMAZON PRIME
Expedited delivery has been a hot topic in the brick and mortar world since Amazon began offering its “Prime” subscription, which allows for free, two-day shipping with no minimum order.

Wal-Mart experimented with same-day delivery during the holiday season in a few metro areas and gives free shipping for certain minimum online orders but has not come close to matching “Prime” on a consistent basis.

That said, Wal-Mart did not rank in the top 10 retailers at risk from Amazon “Prime”, according to the study.

Amazon “Prime” members were 45% more likely to visit Costco and 35% more likely to visit Dick’s Sporting Goods and Target was 18% more likely to see “Prime” members shopping in their stores.

Office Depot and Staples both ranked within the top 10 as the office supply retailers faced a strong likelihood of “Prime” members in their aisles.

“Prime” members that displayed showrooming tendencies were 30% more apt to roam isles at Barnes & Noble than average customers and 19% more likely to do so at Target.