I recently asked two clients what their mainchallenges were in operating their showrooms.
I received a short list from both companies, which prompted me to do an informal survey with several more wholesalers who operate showrooms. Quite a few “challenges” were recited by more than one company. This made me believe more of you may be faced with these same “challenges.”
I should pre-empt my comments by saying there were very few surprises. Many of the challenges I faced when I ran my business still are out there. Certainly smartphones and the Internet have added to the challenge of operating a profitable showroom, but even this can be turned around and used to your advantage.
I bet you can identify with many of these and I’m guessing you probably have found a way to turn them into opportunities and advantages.
Twenty-five years ago this was true for almost all of you, but as I predicted many years ago this has changed to a homeowner-, builder- and designer-driven market. Almost all of you have opened your doors to everyone. Yes, the plumber still is a very important customer and does deserve to receive a slightly better price on products bought through the showroom. However, if it’s a showroom-driven job, the plumber’s discount should not be the same as it is over the counter or out the warehouse door.
You must make more on showroom sales. If you still are in a market where the plumber tries to dictate how much you can make on your showroom sales, you have to decide who’s running your business: the plumber or you? The plain fact is the plumber adds very little value to the sale. You have the showroom and the expertise. You do all the work, so doesn’t it make good sense you earn a fair return on your investment?
Qualifying your clients
Next to closing the sale, learning how to professionally qualify a client is the most important technique you can learn. You must determine who, what, where, when, why and how much information about every client and you must do it early in the process. Too often sales consultants end up giving away much too much information and wasting a lot of time because they haven’t done a good job qualifying the client. This is easy to learn.
Working with builders
Let’s face it, there are tract home builders the wholesale side should be trying to sell to and there are the custom builders that should be using your showroom services. The latter group should be open-minded to putting nice products in their homes to help them be different and more unique than their competition. It’s your job and challenge to educate the builders on the advantages and value the showroom brings to them.
If you have “package” builders trying to use the showroom you most likely will only get frustrated with their lowest-cost mentality. Save time, effort and frustration by being honest and referring them to the wholesale side. Time is money! Use it wisely!
The showroom purpose
This is 100% a wholesale management communication issue. Everyone working for the company should have the same goals in mind — rendering great customer service, selling as much as possible at the best margins possible, working as a team and helping keep expenses at a reasonable figure. Top management must make sure all members of the team know why the showroom exists. Good communication is one of the main keys to business success.
Margins too low
Every wholesaler that responded to my survey listed this as a challenge. Who is in charge of this? You are! I continue to encourage you to achieve gross profit margins in the 35-40% range. I know for a fact there are a number of wholesalers around the country enjoying these margins.
In order to achieve this you have to teach your team how to sell for higher margins. You have to offer a nice diversification of product. You won’t be able to achieve those margins unless you augment your traditional wholesale products with some more unique and specialty-type items.
You have to charge the plumber more on showroom sales. You have to be creative in how you price your products. You should get away from “list less a discount” and go to your own net price. I’ve talked about this subject for years and continue to be frustrated that you don’t/won’t take charge of your own destiny in this important area.
We’re talking about challenges, so how about this one: Starting today add 1% margin to everything you sell in the showroom. After three to six months when you’ve found out you’re not losing sales, add another 1%. Doing this, and the things I’ve listed above, will help you inch those margins up to where they should be. Do this today, not tomorrow!
This is a tough one and I do understand the dilemma. The size of the marketplace dictates you have a smaller showroom and can only afford one sales consultant. This creates the challenge of how can you offer those customer-friendly hours I keep talking about and how can you attract good, competent people and pay them a fair wage? If it is a small marketplace you may be the only game in town which should allow you to be the dominant showroom in the area. This also should allow you to make those higher margins I referred to above.
Isn’t that how free enterprise works? Less competition should equal higher profitability. If a showroom in a small marketplace can’t average $40,000-$50,000 per month in sales at 35% gross profit margin, maybe this isn’t a good place to have a showroom.
Adding foot traffic
This is an ongoing, never-ending question and one where the answer is always evolving. Years ago it used to be Yellow Pages, magazines and newspaper ads plus maybe a little radio and TV. Today it’s having the absolutely best website in your marketplace and having a strong presence on several social media platforms. What hasn’t changed is referrals should be your No. 1 way of attracting more people to your showroom.
If you offer and deliver excellent service and value (notice I didn’t say price) folks will keep coming back and they will tell their friends and relatives what a great place your showroom is to do business. I also like doing events, all kinds of them. Do as many as possible in the showroom. They can be educational, charitable and special sales directed to trade professionals, but always with a good reason for potential clients to visit your showroom. All this should be part of your annual marketing plan for which you should have created a marketing budget of 4-5% of showroom sales.
Internet and big boxes
This really is two different challenges, but both have a similar solution. Identify what your main 5-10 value points are and sell them. You offer more knowledge. You show and sell the latest and greatest in higher-end bath and kitchen products. You hold your clients hand through the whole project. Your company is probably family owned and has been in business for a number of years. The company has a number of branches and is large enough to earn excellent buying power. Your team is the best-trained. And most importantly the client gets you!
You are the best at what you do in your marketplace. Once you’ve identified both your company and individual value points you must relate this information to your clients. These are the things that differentiate you from the Internet and big-box stores.
Finding good people
Here’s the key to everything. Your showroom will only be as strong as your weakest person. That means you must continually strive to hire and retain the very best people. They are out there – and you can afford them. If you’re not paying good productive salespeople in the $45,000-$55-000 range annually you may have a problem attracting good people.
In my opinion for too many years too many wholesalers have been reluctant to structure comp packages that will help them attract and keep really good sales consultants. I have recited my “five bests” for attracting and keeping good people several times. It’s a great human-resource strategy so here it is again: Hire the best; train the best; motivate the best; communicate the best and compensate the best! You will set yourself up to be the best.
One of my clients needed another salesperson for their showroom. The boss challenged the other members of the team to think of people they knew who might make a good member of the showroom staff.
One of the folks recommended a friend of hers who was a personal shopper for a local Nordstrom’s store. The showroom location was closer to that person’s home and the opportunity to work with high-end clients selling products for the kitchen and bath sounded exciting. Six months later that new hire is one of the leading sales consultants. Plus, with the comp package she was offered she is making more money. It turned out to be a win-win for all concerned. Be creative in your search for good people and remember the five bests.
I still have a dozen more challenges left to talk about from the survey which might call for another article.
If you have any successful solutions to the above challenges let me know and I’ll try to incorporate them into that next piece. If you’d like to join the survey, send me your list of the biggest challenges you face in operating your showroom. I’ll do my best to offer some ideas and advice. Good selling!