Should Brick-and-Mortar Retailers Always Counter Showrooming? The Role of In-Store Service

Abstract

The utilization of in-store service has become a vital strategy for brick-and-mortar (B&M) retailers to compete against e-tailers and counter consumer showrooming behavior (CSB), but it faces a paradox: while enhancing in-store service aims to mitigate CSB, it may inadvertently intensify CSB due to freeriding by certain consumers. To address the issue, we incorporate in-store service into a game-theoretic model to explore the price competition between a B&M retailer and an e-tailer in the presence of CSB. Based on capturing the heterogeneity in consumer perceptions of product valuation and in-store service, we analyze the price and service strategies of the retailers in different time spans. Our results show that CSB may lead to profit declines for both B&M retailer and e-tailer. Furthermore, we demonstrate that the nondigital attributes of products are strongly tied to in-store service strategies aimed at alleviating CSB. Specifically, the B&M retailer selling low nondigital-attribute product should provide low-level in-store service to mitigate CSB, whereas those selling high nondigital-attribute product should provide high-level in-store service. Moreover, our results indicate that the B&M retailer does not always counter CSB due to in-store service cost. When the service cost or travel cost is low, the B&M retailer is more likely to embrace CSB. Interestingly, when CSB intensity is low, the B&M retailer is more willing to counter CSB. Finally, a counterintuitive but interesting result shows that the price matching strategy of the B&M retailer does not always guarantee a consistent improvement in its profit.