Turning away genuine customers while avoiding free loaders

by Ashvini on May 7, 2013 · 7 comments

in Business,My Personal Thoughts

An interesting story about people who try things offline and then buy online has been published here. It seems that offline stores bear the brunt of staff costs, when staff help customers make choices about buying. Many times , the supposed buyer just walks off after testing the product and later buys the same thing from an online store, often at a discount. The retail stores are then left with lesser sales and higher costs.

Their frustration at this behaviour of buyer seems justified. The online stores do not have costs of hiring sales staff and paying for them. The offline stores is then angry with both buyers and online stores for taking away the revenues.

How would you as a small business owner cope with such a change? Is it good to blame buyers for what they are doing? When you open a shop, it means that you want people to visit it.ID-10051067

There are all kinds of shoppers that you will get including

  • People who decide fast
  • People who decide slow
  • People who will try at your shop and buy at another store or online

Can anyone tell which kind of customers they are, when they walk in? Probably only a very skilled salesman can. It is practically impossible to get in the head of a buyer.  A lot of bargain customers will check out tens of shops before they decide to buy something. This process has been going on since probably the word “competition” entered business terminology. Now it is just easier to follow when one has a computer and an internet connection.

The response from retailers is to sue and make the competitors bend to will and to achieve parity with respect to prices. But there are following assumptions in this thought process

  • Everyone is looking for a bargain
  • Online retailers are responsible for lost customer sales
  • Everyone is buying online

And you know all these assumptions can be questioned. Not everyone is looking for a bargain. A lot of them want the cool comfort environment of a shop with helpful sales people around. Some customers are driven by higher social status and seek exclusivity. Some of them hate online shopping.

It is all about kind of crowd your store attracts. If your store is attracting bargain hunters, be aware that you cannot stop them from looking elsewhere. They will do that online, offline or anywhere else. They will travel many miles just to get that right price. It is just impossible to stop them and restricting their choices would make them more angry against their businesses. Bargaining has been in existence from time immemorial and it is not going to go away because of social etiquettes. Since, there is no option to bargain price in stores these days, a bargain hunter keeps looking for bargain at many places.

The major problem that store faces is the cost of sales people. A lot of people get the free ride and there are cost to hire sales people. When I launched my eBook which took me four months to write, I gave it in exchange for email. To my surprise , people used fake email ids to download the eBook. I had to mention on the page of the download that free fake ids reduce chance of interactions and it is not a great thing to do. After that fake ids disappeared.

The point is that no matter what you do , free riding will exist. There are a few ways one can reduce it .

  • Raising awareness about the cost and time spent to help customers.
  • Sell more high margin products
  • Use technology to understand customer behaviour. Institute rewards program
  • Consider going online.
  • Change the way business is done. Attract repeat paying clients more. Move out of commodity business. Get into exclusivity.

Suing competition or charging buyers for service/advice is not a great idea because that way you may be turning off the buyers who are willing to buy but have not made up their mind. One needs to be innovative to keep free loaders at bay while attracting genuine buyers.

Image courtesy of YaiSirichai / FreeDigitalPhotos.net

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{ 7 comments… read them below or add one }

Zalando May 11, 2013 at 12:30 pm

It is annoying for the shop owners when the customers show up just to check out the items and later buy it online. I have experienced this my whole life and was not able to get any solution for this problem. I am glad that I have came here and read this post. I have certainly found out some solutions for this problem. All depends how well I am able to execute it. Thanks a lot Mr. Ashvini and taking up the matter. Great to read the comments too. Keep posting.

Zalando’s latest article :Nicki Minaj wordt de buurvrouw van de Lau

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Leora May 8, 2013 at 4:06 pm

A friend (who runs a business) complains about local people who advertise shops in their homes (where they legally should not be) and hurt businesses that pay good money to have a shop on the main street in town.

Some of this comes down to ethics – I fear that few people choose an option because it is the right thing to do. In our family, if you spend a lot of time shopping in a store using a salesperson’s time, then you buy from that salesperson. For ethical reasons.

We had a discussion a while back about the expression: People buy from people. Is this true? I’m afraid the bargain hunters buy on price. I like to buy from a good person.

Leora’s latest article :Benefits of a Business Blog for Small Biz

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Ashvini Kumar Saxena May 8, 2013 at 4:33 pm

Hi Leora,

Great to see you here :).

I believe that most of the people do behave ethically most of the time. However a lot of people would game the system if they are allowed to do that. I think bargain hunters will go on doing that . They have no interest in protecting businesses or maintaining relations with them. The businesses need to decide if they want to attract them.
I don’t think a person who really wants to buy and is not a bargain hunter would like waste anyone’s time .

Thanks for your comment :)

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Radu May 7, 2013 at 10:04 pm

It is true, that offline stores have to pay rent, power, salaries and so on and for this reason the prices are a bit higher but keep in mind that most of the online shops have similar prices, meaning they profit more. It’s true that online shops have to pay for logistic but most of the time the customer pays the transport.

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Ashvini Kumar Saxena May 8, 2013 at 1:41 pm

That’s true. The bone of contention is profit. Offline retailers need to do much better to attract and keep customers.

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Lori Gosselin May 7, 2013 at 5:50 pm

Hi Ashvini,
This is a business concern for small businesses today. Online tools make it so easy to compare online but how do you try on a shoe there?
I agree that some people like the experience of going shopping – there is a reason for the lovely term, “retail therapy” and you don’t get that feeling online! You want to come home with bags and bags of treasures! Even yard sales qualify because you come home with stuff!
So my feeling is that if you offer an offline business, first be online too (and I know a great business coach/adviser for that ;-) and second, make your business offer a shopping experience so personal and inviting that the relationship generated ensures that online shopping will not follow a departure from your shop.
Is that possible? Anything is possible, right?
Lori

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Ashvini Kumar Saxena May 8, 2013 at 2:14 pm

Hi Lori,

I know what you mean by retail therapy :D.
I feel the problem may be the lack of understanding of overall market. There are customers who want to touch and feel the items before they take it. That is the reason e – commerce has not been an outright success here in India. People like to see things before they buy.
They need to enhance the buyer experience rather than putting restrictions on customers. I agree with your suggestions there :).

And I have a fair idea who that coach is :D

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