Brick-and-mortar retailers like Target, Best Buy, and Walmart have an exasperating problem that is threatening their very survival: shoppers who visit their stores, but not to buy the merchandise. Instead, these shoppers are showrooming—visiting a brick-and-mortar store to inspect the merchandise and then whipping out their smartphones to find the item at a cheaper price and then buying it online.

The explosive growth of mobile shopping apps has given customers a dizzying range of methods to pay less for their purchases. For example, Google Shopping and BuyVia allow shoppers to compare prices and make online purchases; ShopSavvy and ShopAdvisor send them discount alerts; and Coupons.com lets them search for coupon and promotion codes to apply to their purchases.

In 2017, U.S. sales on mobile devices grew to over $156 billion from $115 billion in 2016, and they are expected to nearly triple by 2021. The consulting firm Accenture found that 73% of customers with mobile devices prefer to shop with their phones rather than talk to a salesperson. Not surprisingly, by 2021, mobile phones will be responsible for nearly 54% of all retail e-commerce sales.

But brick-and-mortar retailers are fighting back. To combat showrooming, Target stocks products that manufacturers have slightly modified at Target’s request, making it hard for showroomers to find an online comparison. Like other retailers, Target has been building its online presence, as well as sending coupons and discount alerts to customers’ phones.

Walmart offers free in-store delivery for online purchases so customers can avoid shipping charges. And Staples will give you a discount on a new printer if you bring in an old one.

However, traditional retailers know their survival rests on pricing. So Best Buy, Walmart, and Target will now match the prices of rival retailers. Walmart has even created a mobile app that allows shoppers to scan a Walmart receipt and compare the prices paid to competitors’

advertised deals and get the difference back on a Walmart gift card.

It’s clearly a race for survival. As one analyst said, “Only a couple of retailers can play the lowest-price game. This is going to accelerate the demise of retailers who do not have either competitive pricing or standout store experience.”

Questions:-

1. From the evidence in the case, what can you infer about whether or not the retail market for electronics satisfied the conditions for perfect competition before the advent of comparison price shopping via mobile app? What was the most important impediment to competition?
2. What effect is the introduction of shopping apps having on competition in the retail market for electronics? On the profitability of brick-and-mortar retailers like Best Buy? What, on average, will be the effect on the consumer surplus of purchasers of these items?
3. Why are some retailers responding by having manufacturers make slightly modified or exclusive versions of products for them? Is this trend likely to increase or diminish?