Competition, gross profits and marketing strategies are examined.

Banner Plumbing Supply's Buffalo Grove, IL, showroom. Photo by Pat Lenius


The 2011 Showroom Survey by Supply House Times and BNP Media Market Research found that 98% of respondents provide product knowledge training. Other training cited by responding companies included computer training, offered by 74%, and sales training, by 67%. The training can be provided in person by vendors, online or at trade events/home shows.

Ours is a selling business. With all the great books, CDs, seminars, workshops and instructors available, every company should have an ongoing sales training program. I have written a workbook and do a workshop on the subject for the American Supply Association. Call or email me for more information.

Competition

In 2006, the Supply House Times Showroom Survey found that 53% of respondents named home centers/DIY retailers as the single most serious competitor for their business, while 35% cited other wholesalers with showrooms. Only 7% said dealers on the Internet posed the biggest competitive threat.

In the 2011 Supply House Times Showroom Survey, 86% of respondents said they agreed or strongly agreed that other wholesalers with showrooms are serious competitors, while 78% said they agreed/strongly agreed that dealers on the Internet are a competitive threat, and 74% agreed/strongly agreed that home centers and DIY retailers are the biggest competitors for showroom sales.

Have you learned how to sell against dealers on the Internet? This is a huge part of sales training.

Sales And Gross Profit

Plumbing contractors and consumers continue to dominate the largest percentage of showroom sales. When combined, they represent 59% of sales. However, I am surprised that sales to builders and remodelers haven’t grown more. I know we can blame the economy on some of this, but as the survey shows, only 62% of the responding showrooms said they routinely make sales calls on builders, designers and other professional specifiers. Could it be that you have not figured out how to make effective sales calls on this group of potential customers and how to market your products and services to them? This is a big opportunity waiting to be tapped.

The average wholesaler gross profit margin on showroom sales is in the 27 to 32% range. This isn’t high enough. You should be in the 35 to 40% range. Quote net prices only, no more “list less” a discount. Add a couple more points to your gross profit when you do it.

Marketing

Here’s one that always surprises me: how much you spend (as a percentage of sales) on marketing your showrooms. This includes all advertising, promotion and public relations activities.

The average in 2011 was 9%, the same as reported in the 2006 survey. According to the 2011 survey, 24% of respondents allocate only 1 or 2% for marketing, but 41% said they budget 5 to 10% and 28% said they budget more than 10% of showroom sales. This shows an honest effort to get the word out on who you are and what you do.

Where you’re spending your money is changing also. In the Supply House Times 2006 Showroom Survey, the percentage of respondents who identified newspapers, local trade shows/home shows, TV, and open house/in-house events as the most effective marketing tool ranged from 13 to 15%. The Yellow Pages was cited as the most effective tool by 11%, while 25% described the Yellow Pages as the least effective. Radio, consumer/metro-area magazines and direct mail were named as most effective by 7 to 9% of respondents in 2006. Billboards and email/website promotions were ranked most effective by 1 to 3% of respondents and judged to be least effective by 7% of respondents in 2006.

The ranking order revealed in the 2011 Showroom Survey put open house/in-house event and local trade show/home show together at the top as most effective, followed by (ranked in order): email/website promotion, consumer/metro-area magazine, Yellow Pages, direct mail, television, radio, and billboards.

Why Operate A Showroom?

The main reason given for having a showroom according to the 2011 Showroom Survey is “bottom line profitability,” described as “very important” or “extremely important” by 86% of respondents. Other reasons cited by survey respondents included (ranked in order): boosting sales of higher-end products; enhancing the company’s image in the local trading area; commitment to suppliers; and finally, because other wholesalers in the area have a showroom.

The final question asked in the 2011 survey was, “What needs to be done to improve your showroom operation?” I will use the top 10 reasons as the basis of my next article.

Isn’t this great information? I think each of you should fire off an email to Supply House Times and thank them for doing this survey. You might also send a rose - or a piece of chocolate - to my very talented editor, Pat Lenius. She makes this guy look pretty good each and every month. And PLEASE, use this information to your benefit!

Average Gross Profit Margin by Customer Group

Customer                                                GP%

Consumers                                             27%

Remodeling Contractors                      21%

Builders                                                    20%

Plumbing Contractors                            17%

Professional Interior Designers           17%

Kitchen and Bath Dealers                      14%

Source: Supply House Times/BNP Media Market Research

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