Retailers counting on service, tech, tax laws to win over web shoppers

Story Appeared in The Detroit News


Matt Norcross has been selling books for two decades, but lately he must contend with readers who go to his Petoskey shop to see and touch the printed works he offers, only to buy them later from Amazon.com at a savings.

Even if he offers the books at the exact same price, shoppers can save 6% by not paying sales tax online.

“Our store is being used as a selling tool for online retailers,” said Norcross, the owner of McLean & Eakin Booksellers. A few days ago, he added, he even caught a shopper taking pictures of recipes to avoid buying a cookbook. “Brick-and-mortar stores can’t continue that way.”

To address this trend, which the retail industry calls showrooming, small stores like McLean & Eakin are increasingly touting their personal service. Other retailers, including national chains, are offering price matching — and bringing more technology, such as iPads, computer kiosks and digital codes for scanning, into their shops to direct customers to their online sites.

The Michigan Retailers Association is organizing a promotional campaign to support local retailers. And in Washington, D.C., and Lansing, lawmakers are seeking to curb tax-free shopping online by forcing Internet sellers to collect sales taxes.

The U.S. Senate passed the Marketplace Fairness Act on Monday. The vote was 69-27, with opponents of the bill arguing that the legislation makes it harder for online businesses to sell in multiple states. It was sent to the House for consideration.

And in Lansing, lawmakers are discussing a state bill to force online retailers to collect 6% sales tax on items sold to Michigan customers.

“We’d all prefer the federal solution,” said bill sponsor state Rep. Eileen Kowall, R-White Lake Township. “It’s not a new tax, it’s a due tax. It’s trying to eliminate that built-in disadvantage the bricks-and-mortar stores have.”

Forty-five states and the District of Columbia require customers to pay sales tax. But unless an online retailer has a brick-and-mortar store or office on the ground in Michigan, it doesn’t have to collect the sales taxes. And while customers are still supposed to pay the tax when they file their state income tax returns, many don’t.

“Someone who’s strictly driven by price will come in and take advantage,” said Bo Brines, the owner of Little Forks Outfitters, an outdoors retailer in Midland. “Add that to a lack of a level playing field by not having to collect sales tax, and it’s a potent combination.”

A recent study, by Seattle-based group Placed, found 40% of the shoppers participated in showrooming and concluded the threat to retailers may be more serious than they realize. The study was based on survey results from nearly 15,000 people.

In addition to Best Buy and Target, the study found other national retailers, including Bed Bath & Beyond, PetSmart, Toys ‘R’ Us, Sears, Barnes & Noble, Kohl’s, JCPenney — even discount warehouse Costco — were at risk.

“There will be more showrooming,” Placed founder and CEO David Shim predicted. “Now, it’s as simple as ‘I’m going to open an app.’ ”

Some retailers — such as Best Buy and Target — started offering to match online prices to combat showrooming.

But competitive pricing is only part of the problem.

“Customers come in and look at the merchandise. Oftentimes they tie up an associate’s time for 10, 15, 20 minutes — and then they go buy the product on the Internet,” said Tom Scott, senior vice president of the Michigan Retailers Association. “The ruder ones take their phones out right in the store.”

Gorman’s President Tom Lias has a long list of reasons why shopping online can’t match the experience of shopping in the five Gorman’s Furniture stores.

Among them, he said, are the choices, customization and service that customers get when they walk in the store, and being able to rely on the company.

Lias said he’s also encouraging his employees to accept technology: They’re using e-mail and social media to keep in touch with customers. Some are now carrying iPads. And the stores have computer kiosks that customers can use to price and shop certain furniture brands.

“Customers want what they want, when they want it,” he said.

Showrooming was a big topic at this year’s National Retail Federation Expo in New York, as retail experts outlined how online technology is both a threat and an opportunity, said Andrew Cherwenka, the cofounder and CEO of analytics company Authintic in Toronto.

“If you get to the heart of it, retailers don’t care how or where people shop — as long as it’s with them,” said Vicki Cantrell, the executive director at Shop.org, a division of the National Retail Federation.

As an example of this, Walmart, the world’s largest retailer, started a program it called Endless Aisle, which encourages its customers to use smartphones in stores to read digital codes and to order products from its online store.

“We embrace showrooming instead of denying it,” Daniel Morales, Walmart’s director of communications, said in an e-mail. “We’re using e-commerce to make a store with a smaller footprint capable of offering a broader selection through Endless Aisle and by offering the ability to shop online and pick up items in a store.”

And, some retailers say, the only way to really fight technology is with technology.

Last month, the Michigan Retailers Association rolled out a campaign, Buy Nearby, that uses social media to urge customers to shop at local retailers. The campaign — symbolized by a blue, open hand — encourages customers to post stories and photos online of their favorite local shops and restaurants.

Getting shoppers to buy from local retailers, the association said, is the “ultimate anti-showrooming tactic.”