The Middle Man Strikes Back – Australian Retailer Charges Fee for “Just Looking”

In these tough economic times, many stores are resorting to sales or promotions just to get customers through the doors. Not one Australian company, however. Celiac Supplies, a gluten-free specialty food store in Brisbane, may be chasing customers away with its recent policy in which customers are forced to pay $5 AUD (about $5.20 USD) for simply browsing.

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The store’s policy was set forth in a notice posted to the front door of the store by owner Georgina Fatseas-Sano that quickly went viral when a Reddit user shared a picture of it (pictured below). The policy is rather simple; upon entering, customers must fork over the $5 AUD fee which will later be deducted from any purchases they choose to make. Those customers who enter the store only to examine the products without purchasing anything then forfeit their $5 upon exiting the store.

 Just Looking  $5 fee notice

As owner Georgina Fatseas-Sano describes, the policy was created to curb the practice of “showrooming”, a fairly new term for when customers examine a product in-store only to later compare prices and purchase it online. Fatseas-Sano explained that, on average, about 60 customers per week would examine the products, ask the employees questions, and then leave to purchase them online. This practice resulted not only in lost business, but many wasted hours spent giving advice to customers who had no intention of purchasing their products. As Fatseas-Sano notes, “I’m not here to dispense a charity service for [my competitors] to make more money.”

The story of Celiac Supplies and its showrooming woes ties in nicely to our recent class discussion about disintermediation, the tactic popularized by Dell of cutting out the “middle man” and selling directly to customers online. It’s hard to deny the many advantages of disintermediation. Through purchasing directly from manufacturers over the Internet rather than in retail stores, customers reap the benefits of bypassing retailer price mark-ups, comparing prices, customizing products as they please, and never having to worry about product availability. The producers, too, benefit as a result of disintermediation. Not only can they better control inventory by building products only as needed, but they can also boost their sales by offering lower prices free of the mark-ups added by retailers.

With both producers and consumers benefitting from disintermediation, it’s easy to turn a blind eye to the plight of the middle man. Middle man retailers all around the globe are left to suffer the same unwanted consequences of disintermediation faced by Celiac Supplies.  Customers take part in showrooming, sales are lost, inventory accumulates, and valuable time is wasted giving insight and advice to customers who will simply take their business online later. And that’s where the double-edged sword analogy manifests itself once again. While producers and consumers reap the benefits of disintermediation, retailers are struggling to survive.

Looking ahead, we’re left to wonder just how middle man retailers will continue to respond to the growing threat of disintermediation. Luckily, it doesn’t seem that all retailers will take actions as radical as those of Celiac Supplies. For example, we look to Bonobos, a clothing company known for its line of colorful, form-fitting, and youthful pants. In its own retail stores, Bonobos has shifted its focus from sales to service; the company opts out of selling its products in-store and instead uses the stores as locations for customers to try on products and get their questions answered by employees before eventually ordering online (see picture below) Another example comes from big box retailer Best Buy. Best Buy recently extended its Christmas shopping season price-matching guarantee in an effort to curb showrooming. These examples from Bonobos and Best Buy serve to give us hope that the middle men can survive and adapt to the changing nature of how shopping is done in our disintermediation-dominated society in ways other than charging customers for just looking.

 

 

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6 thoughts on “The Middle Man Strikes Back – Australian Retailer Charges Fee for “Just Looking”

  1. I thought your post was very interesting. Before reading, I had never heard of a policy like that of Celiac Supplies. I think that the only reason this store can get away with it is because it is a Gluten-Free specialty shop. I have friends with Celiac Disease that will search countless hours for tasty products. However, they are much more expensive than gluten products which makes sense why people would want to order them in bulk online. I am curious as to how this has affected their sales and business. Instead of charging this fee, I think Celiac Supplies would be better off with a price matching strategy. However, if they simply cannot get their prices as low as the direct sellers, they might have to reconsider their business strategy because if people can get the products cheaper, can you blame them?

  2. I find it difficult to imagine how this policy is going to work for the store in the long term. I understand the owner when he says that he doesn’t want to waste his time on people who are just going to buy the product in bulk online, but I feel like this $5 dollar fee will discourage people from even entering the store, and instead of him making sure all of his customers leave with product, he will actually be losing prospective customers. I don’t see how this business model will help in the future, but if it does work, I’m sure we’ll be seeing this “penalty” implemented in plenty of more mainstream stores, which would definitely be interesting to see.

  3. Your post draws attention to a very interesting dilemma for retailers. Retailers provide services that shoppers cannot get online. But how can retailers prevent “showrooming” without pushing customers away with fees to walk into the store? I agree with the other commenters when they said that charging customers to enter the store will most likely lose customers, yet, price matching is unrealistic as retailers make their profits from marking up products. They are stuck either way.

    I like how you drew attention to the models alternative to the one implored by Celiac supplies. Perhaps Celiac should become more like Bonobos and use an online model? In the new fast paced world that technology has created, where everything is faster, cheaper, quicker, and easier, middle men seem to be getting hit the hardest. Customers will always buy at the cheapest price, while if suppliers can cut out the middleman, why wouldn’t they? Retailers need to provide a service that is worth paying the extra prices, or they will cease to exist.

    Overall, you exposed a very interesting example of a topic discussed in class and used appropriate media in conduction with thoughtful analysis to expand upon it. This blog was very interesting to read, and left me thinking of other ways in which retailers can provide a service that justifies their survival.

  4. I agree with Brendan O’Connell that the “just looking” price policy set forth by Celiac Supplies will not remain profitable in the long run. Eventually customers will learn what they need to buy—perhaps after just one visit to the store— and begin buying everything online without ever returning to the store. On the other hand, the approach Bonobos has taken to remain valuable as a middle-man seems to be much more practical solution. If middle-men want to survive in the increasingly automated and online retail industry, they must focus all of their energy on customer service. They need to capitalize on the flaws of buying online, such as confusing sizing and fit guides like Bonobos seeks to eliminate. Customer service should become their core competency.

  5. This is a very relevant article and everyone who commented made some great insights on the topic. I agree that Celiac Supplies is unique because of its niche market. The majority of people do not have Celiac disease so obviously there is going to be less demand than a grocery store and there are online providers for these foods that are more difficult to find in your typical grocery store. For this reason I understand the difficulty Celiac Supplies faces, however, I don’t think it is a good solution at all. If I were a customer, I would absolutely stop shopping there if I was charged for not buying anything. They need to set their business apart from their competitors in other ways if they are unable to lower their prices. Perhaps they can seek out other vendors and changing their own buying strategy to obtain lower cost goods. Another option is providing exceptional customer service so people will see the obvious added benefit by coming into a store to purchase products. Either way, charging for browsing is not going to be effective.

  6. Another great post! You did an excellent job of relating the interesting story in the beginning back to Dell and the “plight” of the middle man. With the world of shopping becoming increasingly digitized, it’s understandable why the Australian store owner posted that sign(though I’m curious to see if it actually worked to his advantage or not). However I really like your point about Bonobos and Best Buy-they focus on service not sales. I think the service aspect is really irreplaceable in the shopping world, and cannot be mimicked by online websites. Thus, I think they were right to capitalize on it. All in all great post, thanks for sharing!

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