Local Showrooms Face Threats From e-Tailers
E-tailers pose a growing threat to local kitchen and bath showrooms. In many respects, the deck is stacked in their favor. They don’t need to spend so much on real estate, product displays, or showroom staffing. And their success is being fueled by the single most important Internet company on the planet: Google.
But don’t count local kitchen and bath showrooms out just yet. New tools are emerging that just may tip the advantage your way. By understanding the changing competitive landscape, you can use the Internet to make your kitchen and bath showrooms more focused and profitable.
But first you must understand the threat. Without a clear picture of the symbiotic relationship between search engines and e-tailers, it will be difficult for you to mount an effective response.
Change Is Upon UsThe Internet is transforming everything in its path. Change is upon us, whether we like it or not.
First came the “search portals,” and Yahoo was the hands-down winner. From 1994 through 2001, portals and their “banner” ads dominated the search landscape.
Then “search engines,” especially Google, took the lead.
Google’s emergence from under the radar has been nothing short of stunning. The company didn’t even discover its winning revenue model until 2001. Yet in five short years, Google’s revenues from “cost per click” advertising went from zero to $10 billion per year. That’s a lot of change.
And a good chunk of Google’s revenues comes from e-tailers. So Google’s phenomenal prosperity is - in some sense - a direct measure of the growing threat that e-tailers pose to your business.
Why The Internet Is ImportantWhy is the Internet so important? Because 99% of affluent consumers research product options online. Because the vast majority of consumers now go to the Internet first, before they visit local showrooms.
Today, the Internet serves as the spec library for a growing number of architects, designers and builders. It’s the place people go before they get in their cars and come to you. The Internet’s influence on their decision-making process is strong and growing.
But when consumers and designers go to the Web, they mostly find e-tailers. It’s as if someone had built a huge, finely tuned system designed to divert consumer attention away from you and toward your mortal enemies.
This Internet system for redistributing consumer attention away from you is called Google.
It’s not that Google does this intentionally, of course. It’s just the way things have worked out so far. Google wants to make money, and the e-tailers have the biggest incentive to fork over cash and to win top search engine placements.
How Google WorksGoogle is a massive “search engine,” complete with an index of at least 8 billion separate Web pages. (Although Yahoo is now an important search engine as well, Google dominates the market.)
Google “crawls” Web sites and reviews the content on each page. It counts words and word patterns. It looks at titles and headings and font sizes. Based on this review, it makes conclusions about the relevance of each and every Web page. It compares these conclusions to the keyword searches consumers type in.
Google’s special sauce, and claim to fame, is its use of link popularity to create a “Page Rank” for each Web page it encounters. (Page Rank was invented and patented, complete with a bit of tongue in cheek, by Google cofounder Larry Page.) Google determines how popular a Web page is by counting the number of independent links from high-quality Web sites. Links are counted as a kind of vote, and some votes count for much, much more than others.
When you type in a keyword or phrase (“cabinets” or “medicine cabinets” or “recessed medicine cabinets,” for example), Google gives you back what it thinks are the best results.
Each page on Google includes 10 search results and 10 ads. According to recent research, fully 50% of Google users don’t know the difference between the free search results and the paid ads. But the difference is really, really important.
The top two or three results on each page - the ones with a shaded background and the label “sponsors” - are paid ads. The listings in the narrow column on the right side of the page are paid ads, as well.
The search results in the middle of the page are Google’s “editorial” content. These “organic” search results are free. You can’t buy your way in. And the organic results get the most clicks!
As a consequence, a top spot in Google’s organic results is worth its weight in gold.
It's Hard To Come Out On TopHowever, it’s almost impossible for anyone to win these top spots on a consistent basis (at least not for all of the keyword searches that are likely to matter to them).
To show up for free consistently, you need a bit of a miracle:
- Outstanding content,
- Links from high-quality Web sites and pages, and
- Serious skill at “search engine optimization” (SEO).
Google’s rules for what shows up on top are a) extraordinarily complex, b) a tightly kept secret, and c) changing all the time (the “Google dance”). So a bit of luck is also highly recommended!
Most people only click on the top Google results (the ones that are “above the fold”). So to win, great content and great links won’t be enough. You need to have content and links that are better than anyone else’s. To say that competition is fierce is an understatement.
Cost Per Click AdvertisingGoogle’s paid text ads are priced “per click.” That is, every time a user clicks on an ad, the advertiser pays Google. The advertisers who generate the most revenues for Google come up first. Revenues are calculated by multiplying the cost per click times the click-through rate for a particular ad.
The minimum price per click varies (roughly 5 cents for Google, 10 cents for Yahoo). The top price for some searches is $5 per click or more.
As I’m writing this, when users search for “faucets,” Delta is willing to pay $1.24 per click on their text ad. Moen is at $1.21 and American Standard is at 98 cents. For a more refined search on “bathroom faucets,” Delta is willing to pay $1.37. Moen is at $1.21 and American Standard is at $1.12.
Most of the winning text ads are for e-tailers. To see an example of this, try typing in “bath sinks.” All of the above-the-fold ads are for e-tailers. Most of the organic results (free, editorial) are for e-tailers, as well.
Google Tilts The Playing Field Against Local ShowroomsHere’s the threat. Today, people are going to the Web first, before they visit local showrooms. When they go to the Web, where do they go first? Google, of course. And when they go to Google, what do they see? Mostly e-tailers.
Today’s Web is not a level playing field. It’s tilted. Today’s search engines favor e-tailers.
As a local showroom, the chances that you can win consistently within the Google environment are pretty darn low. Here are the advantages of utilizing search engines:
- 1. Google is a direct-marketing medium and
e-tailers are direct marketers.
2. E-tailers don’t pay anything for showroom space, product displays, or knowledgeable salespeople.
3. E-tailers can pour all the money they save on expenses into “search engine optimization” and “search engine advertising.”
If you are a local showroom, the deck is pretty much stacked against you.
Moreover, unless a consumer types in a zip code (usually not the case for initial product research), Google’s free, organic search results are national, not local. So thousands of showrooms are competing for 10 slots on the first page. The chances that this search engine status quo will turn out well for you are slim to none.
Unless there’s an alternative. And there is.
For now, thank goodness, most people still want to touch and feel products before they buy them. Otherwise, local showrooms might well be toast.
Prepare For BattleChange creeps up on us sometimes. One day everything seems just fine. The next day, a crisis is imminent. Twelve years ago, I was quoted as saying, “The Internet changes everything except for human nature.”
At the time, the Internet seemed more a pipe dream than reality. It was, however, already possible to see that it would transform communication and commerce.
Today, people are still steady and unpredictable, independent and fad-seeking, principled and disloyal. The Internet didn’t change human nature one bit. But boy, has it changed human behavior.
- Twelve years ago, few people researched products online
before visiting a local showroom. Today, most people do. (U. S. consumers
conduct more than 50 billion text searches a year.)
- Twelve years ago, U. S. advertisers spent almost nothing online. In
2006, online advertising topped $16 billion.
- Five years ago, Google had barely discovered its revenue model (those little text ads). In 2006, Google’s ad revenues were $10 billion.
It took years for the Internet’s power to become easily recognizable. First it was an infant. Then an adolescent. Today, the Internet is an awkward teenager moving toward adulthood.
Internet-driven change is not going to stop anytime soon. There’s no turning back the clock. Neither consumers, nor advertisers will ever behave the same.
The stage is now set. It’s time to face the new competitive threats and to fully embrace the Internet. It’s time for battle.
A Storm Is BrewingBy empowering e-tailers, the Internet is creating a crisis for the kitchen and bath industry. Long ignored as just so much competitive “noise,” e-tailers are taking market share. A long-simmering conflict is beginning to move front and center.
Privately, some manufacturers characterize their national e-tailers as “bigger customers than most of the individual retail chains we serve.”
Manufacturers are conflicted. They like the business they get through e-tailers. But they can’t live without their local showrooms.
The status quo can’t stand for long. The more business the e-tailers get, the more important they will be to the manufacturers. And the more market share e-tailers take, the more the chorus of complaints from local retailers will grow. A storm is brewing.
You Can't Win By Copying The E-tailersOne way to fight back would be to embrace e-tailing yourself. But that is the equivalent of every city and town in America fighting perceived new terrorist threats by forming its own militia.
Imagine an America in which every single kitchen and bath showroom is armed with e-commerce and is competing tooth and nail to sell online. Nationally.
How well will that work? What will be the impact on the profitability of your industry?
I for one can’t see how this can possibly be a good thing. This futuristic, all-local-showrooms-are-also-e-tailers scenario sounds to me like a race to the bottom, where all that matters is price. And perhaps a self-fulfilling prophecy of victory for the biggest, best-marketed national e-tailers.
Win By Leveraging Your StrengthsThe key to success for local showrooms is not to be more like the e-tailers. It is to use the Internet to leverage existing strengths. And strength comes from difference, not sameness.
Your branding, your store locations, the quality of your sales force, your philosophy of business and your attitude toward customers are all key success factors that set you apart from your competition.
So is your merchandising: the products you choose to display and how you display them. In a very real sense, you are what you display on your showroom floor.
The Internet Can Be A Powerful MatchmakerConsumers and design professionals now go to the Internet first. So it’s critical that you quickly learn how to use the Internet more effectively.
You should use the Web to attract customers who are “in tune” with your business and to steer clear of customers who are not.
The Internet can help you filter out people who are likely to dislike your merchandising. Such customers do more than just waste your marketing dollars and showroom staff time. They tend to generate negative word of mouth, which costs you again and again.
On the flip side, you should be willing to pay a premium to attract consumers who will love your merchandizing, buy from you, be delighted with the products they purchase and recommend you to others again and again.
Loving a product that you display on your showroom floor is an important first step toward a successful customer relationship. It’s often a strong indication of a good match. A second step is for customers to be able to easily see if they like your merchandising more generally (by previewing the other stuff you display).
Then they’ll be ready to decide if they like you enough to come in for a visit. (At which point, it’s up to your sales staff to cement the relationship.)
12 Tips For Fighting BackHere’s a 12-step program for fighting back against the e-tailers (both online and off):
- 1. Continue to improve your core business. Your showroom, displays and
staff are your most important advertising.
2. Leverage the power of face-to-face conversations. Web sites can’t. Use positive attitudes such as openness, kindness and gratitude to create an exceptional showroom experience.
3. Today’s new economic rules favor abundance, not scarcity. So focus on ways that you can bring new abundance to your Web site and showroom. Abundance of information and of visual and tactile choices.
4. Use your Web site to communicate the essence of your brand and to help consumers and designers preview the products that are on display in your showroom.
5. Add a comprehensive product search to your Web site. Give top billing to the products you display. Then let consumers and design professionals dig more deeply using a searchable database of all the brands and products you carry.
6. Move upstream. Seek to capture the attention of consumers and design professionals who are already searching online. Grab their attention as early as possible in their Web-enabled decision process.
7. Find ways to create an emotional connection with the products you display. Try to do so before potential sales prospects are even thinking about where to shop locally. Then be sure you show up prominently when they do.
8. Market yourself on leading home design Web sites, especially sites that are focused on driving foot traffic and sales to local showrooms.
9. Encourage your manufacturers to be more aggressive in supporting you online. The support they provide via their own Web sites is not enough. As often as not, manufacturer Web sites are outflanked by the e-tailers, just like you are.
10. Band together with other local retailers. There is power in numbers and shared interest. By joining together - via third-party services - you can come up higher on Google than the e-tailers do. (Naturally, for this to work you’ll have to be confident that you can compete more effectively locally than you can with the e-tailers.)
11. Equip your showroom sales staff with Web-linked in-store computers. Use these computers to review project plans and product options with customers. (Print catalogs, while still necessary, are often no longer sufficient to satisfy customer expectations.)
12. Collaborate with consumers and their design professionals more effectively using shared “Personal Portfolios.” It’s easier to communicate when everyone is talking about a picture, not imagining needs and desires based on fuzzy words like “traditional” and “contemporary.”
You Can Do It!So far, the Internet has predominantly advantaged the e-tailers. But the landscape is shifting. It’s time to level the playing field.
The key is not to join the e-tailers, but to outflank them. By coupling your own natural strengths with emerging new Internet tools, you can fight back the onslaught and increase the profitability of your local showrooms.