Beating The Drum!
Have I mentioned recently how much I love the showroom segment of our great industry? It's true - I have a passion for showrooms and what a wonderful revenue opportunity they can be. I've always set high standards for myself and others - just ask my poor wife and four kids! But you know what, you'll never convince me that setting high standards (as long as they are achievable and reasonable) is a bad thing. Maybe that's why I'm feeling so much frustration as I sit down and write this article.
I recently spent a full week working with a medium-sized family-owned wholesaler. They have 11 branches and six showrooms. They do about $7 million in sales revenues out of the showrooms at about 27.5% gross profit. They recognized that they had invested a lot of money into building out the showrooms, hiring and training people, and that they were making a very small return on their investment. Most importantly, they recognized they could do a lot better. They just weren't exactly sure how to structure a formal written business plan that would lead them where they want to go. Thus a call to me!
My week with these folks was terrific. It was very productive, very educational and for me very frustrating! Here's why: Part of my assignment was to “mystery shop” all six of their showrooms (even though their folks knew I was in town) and to “shop” all of their major competitors in the six cities where they had showrooms. When the week was over, I had “shopped” 19 different competitors' showrooms, and all six of my client's.
I have a two page “Mystery Shopping” form with about 35 separate items that I use as a guide. (I've offered this to my readers several times and I am again - just e-mail me). Between Mapquest and the GPS in the rental car, finding all locations was pretty easy.
Here are the main things that have caused my frustration and prompted me to write yet another article whipping up on the wholesalers and how most (yes, still most) of you operate your showroom businesses. Just when I start to believe you're getting the message, I have an experience like this!
MAIN CAUSES OF FRUSTRATION (after visiting 25 showrooms):
- LOCATION: 20 out of 25 locations were poor. They were in industrial areas, off the beaten path and nowhere near other high end building product companies or higher end retail stores.
- PRODUCT DIVERSIFICATION: (This one really bothered me!) Every single wholesaler, including my client, all displayed and sold the same products. All the traditional wholesaler lines (either Kohler, American Standard, half had Toto, all had Delta/Brizo, Moen/Showhouse, Elkay, the same whirlpool tub lines etc., etc., etc.) They had branched out and taken a decorative faucet line (that's good) but all had Danze! In other words, all these great product lines were represented by everyone. And don't forget that the Big Boxes have virtually all of these lines too! So what happens to the price when great products are turned into commodities? You got it - it's impossible to achieve a 35%+ GP margin in the showroom when this is the case.
- THE PLUMBER IS STILL KING: This particular marketplace (200 miles north to south and 100 miles east to west) is still ruled by the plumber. None of the showrooms would quote me (acting as an owner/builder) a direct price. I had to go through the plumber. My question here is: other than saying go to “X” Showroom - what value does the plumber bring to the sale? ZERO! They haven't invested in the showroom build out of products, they carry no inventories, they do none of the selling, they have none of the product knowledge it requires to make showroom sales. But they want, even dictate, that they must receive a 40% (or more) discount off list price. They are making 30%+ on the products and a very nice wage to install as well. They're making more (a lot more) and doing less (far less) than the wholesaler. Don't you think there's something wrong with that picture? I certainly do. Allow me to ask you an important question. Just who is running your business? You or the plumber? The folks in this particular marketplace - and anywhere else that the plumber still rules - need to take charge of their own destinies. I lived through the transition at my own business 20 years ago. I've worked with dozens of wholesalers during the past 10 years - helping them through the transition. The plain and simple fact is: the plumber is losing, or has lost, the buy/sell on higher end showroom type products. How many of you can remember when the electrician supplied 100% of all the light fixtures for a project? Today they supply none, zero, zip, nada - because they didn't add value to the process.
- EXTENDING THE SAME LONG DISCOUNT TO PLUMBERS ON SHOWROOM SALES AS THEY RECEIVE ON COUNTER AND WAREHOUSE SALES: You just can't do this and expect to earn a decent return on investment in showroom sales. The showroom is a high cost operation. The quoting, writing the order, purchasing the material, bringing it in, sitting on it process is a much more costly activity than pure wholesale sales. The cost of the showroom, sales and gross profit dollars per employee are an important factor also. If the plumbers get a 40%+/- discount on the wholesale side, their discount through the showroom has to be 30% or less. Heck, they'll make more because they put a markup on the product anyway (15% on top of $11,000 at cost nets them more than 15% on top of $10,000 at cost)…and you'll make more. Win-win for all!
HOW TO MAKE IT BETTER
- OPEN THE DOORS TO EVERYONE: Yes, actively go after the homeowner, custom builder, remodel contractor, interior designer business. It's BIG! This is how most folks want to buy: direct! It's their home, their taste in products and their money. Be customer friendly.
- DON'T DICTATE THAT CLIENTS HAVE TO MAKE AN APPOINTMENT: Encourage them in a nice customer friendly way to make appointments, but don't turn customers away. How about the client and his/her spouse who are building a 10,000 sq. ft., five bathroom home and have taken the day off work, driving 30 miles to come to your showroom. Are you going to tell them: “No thanks, we can't work with you today. Maybe sometime next week!” I don't think so! Eighteen out of the 25 showrooms I mystery shopped had signs on the front door saying “Appointments Required”! In fact, one showroom had locked the showroom doors and had the “Appointment Required” signage and then added “All appointments must be made 48 hours in advance.” When I shopped this showroom (I went in through the warehouse) there was one consultant, no clients and the consultant wouldn't talk to me. How do you maximize return with attitudes and policies like that?
- BUILD OUT NICE SHOWROOMS AND MAINTAIN THEM ACCORDINGLY: Most of the showrooms I visited were “dogs.” Very few were well maintained. Why do a showroom at all if you're not going to do it first class? And if you do it first class, why wouldn't you want to maintain it that way?
- MAKE THE SHOWROOM ENTRANCE VERY VISIBLE AND RESERVE THE PARKING SPOTS CLOSEST TO THE ENTRANCE FOR SHOWROOM CUSTOMERS ONLY: At a couple of the showrooms I visited I couldn't find the entrance and too many times employees or reps or whoever had taken the best parking spots. Be customer friendly!
- MEET AND GREET EVERY CUSTOMER WHO WALKS THROUGH THE FRONT DOOR: This is the one that drove me nuts - causing me to write another article venting my frustrations.
Excluding my client's six showrooms, because they knew I was coming, I had the unbelievable experience of spending an average of 40 minutes in each of 19 showrooms and in only three cases did anyone say “Welcome” or “Thanks for coming in. What project are you working on?” “We encourage appointments because…” That means in 16 showrooms no one even acknowledged me. Now as the owner of a business who has invested an average of $250,000+/- wouldn't I feel really good to know that my salespeople didn't even exert any effort to meet and greet potential clients? To me this is inexcusable! But it does help explain why sales and profit productivity is so low with most wholesaler showrooms. Needless to say, I could really take off on this one. It drives me crazy! And you know what? If I didn't care so very much, if I didn't want to see you succeed so very much - I'd put my soapbox and drum away and let you continue to wallow in your mediocrity - or less!
Thanks for letting me vent! The good news is my client in this market place is taking charge of their own destiny - and if I had to venture a prediction, they'll be the showroom winners in their trading area. And that will make me feel really good! Maybe even enough to keep beating the drum!