Showrooming and the Internet
Embracing technology will help strengthen your business.
I, like you, have had a great concern on how the Internet is changing the way decorative plumbing and hardware showrooms do business. It’s affecting wholesalers and independents alike and it doesn’t discriminate against large or small businesses. It’s affecting all of us.
Everyone asks me what they can do to continue to keep their businesses strong and viable against this tough, unorthodox and unconventional competitor. In the past I have maintained that having a strong value-point selling message and great selling skills is the number one line of defense. I still believe that! Over the past several months I have talked with dozens of people and read numerous articles and books on the Internet revolution and how it’s affecting brick–and-mortar businesses. I have tried to analyze what I would be doing if I still owned my three showrooms.
In order to get my head around this growing and powerful phenomenon and terms such as showrooming, social media, IMAP, MSRP, the Cloud, smartphones, etc., I’ve had to open my mind and accept the fact that technology is not only the wave of the future, but the key to continued success for those operating showrooms. The old model of having nice displays, competitive pricing along with friendly and knowledgeable salespeople will not be sufficient to help you thrive and survive unless you embrace many of the new and exciting options that technology has to offer you.
I know the frustration many of you are experiencing with the Internet. Your clients perceive that using the Internet will be easier, quicker and cheaper. In many instances this is true. Over the past several years I have seen a serious erosion of showroom sales and profits. The recession (depression?) has meant fewer sales to go around. Unfortunately, the “big volume” mentality is to “cut prices” to an unprecedented low. I personally disagree very strongly with this strategy. Your cost of doing business hasn’t gone down - so the decrease in margins can only mean smaller bottom lines (and they weren’t all that good to begin with).
Most of us are grumbling about our governments (at all levels) and how they don’t run their “business” like a real business. I live in Sacramento, Calif. My city, county, state and country are all upside down and deep in debt. I was taught in business school that every business has revenues and expenses and if you want to stay in business those revenues have to exceed expenses. It seems pretty easy to me. When revenues shrink, so must expenses.
Unfortunately, I don’t believe that many of you that have elected to cut prices in order to realize volume have reduced expenses accordingly. I can only believe that this has led to smaller and maybe even upside-down bottom lines for your showrooms. Where is the good business management in that? Of course, all of this is easy for me to say. I haven’t owned and operated a business through these difficult times.
What is showrooming?By definition showrooming is the act of examining merchandise in a brick-and-mortar “retail” store without purchasing it there, then shopping online to find a lower price for the same item. Online stores often offer lower prices than brick-and-mortar stores because they don’t have as much overhead cost. Showrooming can be costly for the retailers, not only in the loss of the sale and time spent with the clients, but also due to wear and tear caused to the product floor samples.
One of my clients recently said: “Seeing customers turn on their smartphones to shop price and then pass on buying my products really hurts! It’s like being at a high school dance and watching your date leave with someone better looking than you!”
Smartphones and online shopping are here to stay. Online shopping has cost retailers and businesses like yours millions of dollars in sales. Worldwide mobile payment transactions have grown from $106 billion in 2011 to an estimated $171.2 billion in 2012. That’s a 62% increase in one year. In 2011, Amazon’s worldwide sales grew by 47%. I’m sure you are aware that Amazon now has Amazon Supply and it is selling many of the same products that you display and sell in your showrooms. If that doesn’t cause your heart to skip a beat I don’t know what will.
How to fight backTo some degree showrooming hasn’t only been directed to online shopping. How about all those customers that you spent hours and hours with and then you let them walk out of your showroom with prices and model numbers? They took your quote down the street and “shopped” it with a competitor. You did all the work and they got the order. Isn’t that similar to showrooming? The easy fix is don’t make it easy for them to do that. Don’t give out the model numbers.
This thing called showrooming isn’t only affecting businesses like yours. It’s impacting every retailer…big and small! Best Buy, Target, Walmart, Macy’s, Nordstrom, Home Depot, Sears and all the other “big boys” have been affected, but are all taking steps to combat it.
Best Buy is replacing standard bar codes with “special” Best Buy-only codes on bigger- ticket items so they cannot be scanned and compared online. Several of these “big boys” have added return centers, pickup locations, free shipping, outlets, payment booths and even drive-thru customer service centers for online sales to their brick-and-mortar stores.
Let’s face it. We are all living in the age of the customer, and you can either fight these trends that are happening or you can embrace them. You all have a lot of assets (your showrooms, inventory delivery, well-trained staff, etc.), but they are only assets if you embrace the trends of the customers.
You could do what Walmart started doing recently - allow your customers to order product online from you and then pay cash for it at your location when they pick it up. Of course, if there is special-order product involved, you will have to get a deposit or have it paid in full when the order is placed. More than half of the sales from Walmart.com are now picked up at Walmart stores.
Sears, another one of the “big boys,” has long offered store pickup for items bought on the Internet, and has now added a drive-thru service that allows customers to return or exchange purchases without leaving their car. Customers today have a certain need for immediacy. They want transactions to happen quickly. They want products now - or at least in 24-48 hours. I know this is tough - impossible in some cases. However, figuring out how to speed up doing business with your company will win more sales.
Both Nordstrom and Macy’s have added a feature that allows customers to search an individual store’s inventory via the Web. If the local store doesn’t have what you want in its inventory, but another store does it will ship the item direct to the e-commerce customer.
Face the futureAlison Jatlow Levy, a retail consultant at global management consultant firm Kurt Salmon, says she expects online retailers to open brick-and-mortar stores to allow customers to exercise showrooming for the products they sell. This would add to the cost of their doing business and bode well for maintaining reasonable price levels. Look out; Amazon may have a showroom in your area sometime in the future.
Here’s an experience I recently had at a local Nordstrom store. I had researched a specific brand of casual shoe and thought Nordstrom sold them. The sales consultant said, “No, but we offer a very similar product.” He whipped out a smartphone and brought up images and pricing of the product he sold. I found one I liked, but the local store didn’t have it in stock. Two days later, the shoes were delivered from a different store directly to my home.
Not all Nordstrom sales consultants had these smartphones to help them win sales. The gentleman that waited on me said they spread eight phones out to some 20 sales consultants. He also told me it has been so successful he expects every sales consultant will have them in the near future.
This is something you can (and I believe should) do at your showroom. Have smartphones and/or an iPad for every sales consultant. Log on to any of your vendors at the touch of a button. When a client walks in the door, lock it. Don’t let them out until you’ve won the order. Using every bit of sales training, incredible value packages and technology will convince the client that they don’t have time to buy online. You offer more value and your pricing will be competitive.
If you’re going to win the retail wars (your business is much more retail than wholesale), you have to win the hearts and minds of your customers. Stop whining and worrying and learn all you can about what your customers really want and then get proactive and give it to them.
Next time I hope to announce some exciting news concerning Internet manufacturer advertised pricing (IMAP) and how it will help protect pricing on the Internet. In the meantime, good selling!