Darlington on Showrooms: Step out of the box!
Some 60,000 people will tour the exhibition hall in Orlando at K/BIS (Kitchen and Bath Industry Show), sit in on seminars and look for new products, new ideas and possibly new sources for old and new products. There will be more kitchen and bath people at the show than there will be plumbing wholesalers. Many of the wholesaler people that attend will be showroom personnel, not "principals." I think this is a missed opportunity on the part of the owners/ managers - because the showroom is a terrific opportunity for a wholesaler to grow its business. It's a chance to step outside the traditional wholesaler box and diversify your product and selling mix.
I have beaten this drum in the past, but I feel it warrants one more effort! Diversify your product mix and selling strategy. Take off your wholesaler hat and put on a retailer hat. Learn how to market your showroom direct to the consumer trade. Give them "one-stop shopping" on the products they buy. Your sales will grow, your margin on sell will almost double (from 20% to 40%), and your suppliers will be thrilled to sell more of their profitable high-end products. Also, in the long run you'll be helping your traditional core customer - the plumber - make more money. He can, and should be, able to charge more to install higher-end products. The plumber might have lost the buy/sell transaction, but he won't have the hassle of handling the product and the accounts receivable. Plumbers can make more as pure installers.
Back in 1960 when I started working for Raub Supply in Lancaster, Pa., it had nice showrooms set up to show the product to the homeowner. The plumber bought the product. That was 40 years ago. Today's consumers not only want to select the products for their homes, they want to make the purchase as well!
Here in Orlando there are more than 625 companies exhibiting kitchen and bath products. The opportunity for diversification is tremendous. The neat thing about high-end showroom selling is you don't have to inventory the product. It's 80% special order. And while we're talking plusses - there's no accounts receivable when you sell the consumer direct: 50% down and the balance on delivery. No inventory, no A/R and double the margin. Doesn't that combination have some appeal?
My "little" showroom business was selling close to 10 million dollars' worth of high-end products when we sold the business. Half was direct to the consumer and half was to the trades (plumber, builder, interior designer). Our margins were in the high 30s and we offered a full line of kitchen and bath products - "one-stop shopping." A large plumbing wholesaler bought the business and has grown on our success. It has maintained a separate identity and selling philosophy for the showroom business and has brought its "purchasing power" to the mix to help grow margins even more.
I've also seen some changes in my "old business" that concern me: closing on Saturdays, eliminating easy customer pick-up of product, and changing compensation programs which results in reducing the reward for individual productivity. In a robust economy, these changes may not hurt, but in the long run being customer friendly on a consistent basis is very important.
The showroom business is different - really different! The consumer is the main client, whether you sell directly to him or not. Making your business customer friendly is paramount!
The "big boxes" are not only cutting into the wholesalers' traditional package of goods - rough plumbing, white fixtures, chrome faucets, water heaters, etc. - they are beginning to target the high-end products. Consider Home Depot's upscale Home Expo, Sear's The Great Indoors and a new business called Decor. If you haven't visited one of these stores, do it! You'll either come away discouraged and concerned, or feel challenged and excited. You can sit back and concede the growing of your high-end business or you can grow your showrooms in size, product, selling strategy and customer services.
In my opinion, to have a showroom because a major vendor insists upon it, or to back up the plumber, or because your competition has one are the wrong reasons to be in this specialty business. The main reason should be to make money, to maximize the return on your investment and to enhance and ensure your future in the business. Wholesale businesses and showroom businesses are very different. It takes two very distinctly different sets of skills.
Selling a plumbing or mechanical contractor is totally different than selling a consumer or interior designer. The wholesale business is managing assets (inventory and accounts receivable) and managing people. Buy right and sell right. The showroom business is marketing, public relations, merchandising and a long list of consumer-friendly services. Managing people well is the only similarity. Wholesalers not only have to make a financial commitment to doing a showroom business, they have to make a talent and time commitment.
Take time in Orlando at K/BIS and look at the terrific product diversification opportunities. Do you show and sell bath accessories, such as knobs and pulls, medicine cabinets, towel warmers, steamers, saunas, door hardware? Have you considered tile, kitchen cabinets, bath vanities, appliances, lighting fixtures? By adding products you offer the "one-stop shopping" that today's busy customers want and at the same time you grow your revenues.
Certainly being open on Saturdays, Sundays, or possibly evenings presents some staffing challenges. Learning to be a merchandiser and marketer is an all-new experience. It costs you a little to take credit cards in payment, but take it from a guy who grew up in the wholesale plumbing business: Selling 10 million dollars' worth of product at 38% gross profit isn't all that bad! And when I say selling, that's what showroom transactions really are. It's not just a plumber asking you for today's price on copper tubing. There's some real satisfaction to be gained from true selling vs. being the lowest bidder.
Yep, the old boy can be really opinionated! But having run a successful business and having had the wonderful experience of doing consulting work (sharing successful ideas with many clients and seeing them grow in both the business bottom line and the owner's personal satisfaction) may give me some license to share these opinions.