I thought it would be fun and interesting toseehow several owners of large plumbing distributor businesses felt about the future of showrooms over the next 10 years. My panel for this discussion included:
- Howard Frankel (president of New York City-based Central Plumbing Specialtiesand Grande Central Showrooms);
- Joe Poehling (chairman and CEO of La Crosse, Wis.-based First Supply, Gerhard’s Kitchen and Bath stores and the Kohler Signature Store by First Supply);
- Kymberly Weiner (marketing and showroom manager for Scarsdale, N.Y.-based Best Plumbing Tile and Stone); and
- Ted Green (president of Rohnert Park, Calif.-based Pace Supply and Premiere Bath and Kitchen).
How important are showrooms to your business today and where do you see them in 10 years?
Howard Frankel: Showrooms are a great balance to the wholesale side of our business. They offer better margins, are busy in the summer when our HVAC business tapers, and stay busier during economic slowdowns and when new construction slows down. We expect the showroom business to be just as prevalent in 10 years and expect this important part of our overall business to continue to grow.
Joe Poehling: Our stores are a key part of our strategy to be a dominant distributor to our customers and supplier for our manufacturing partners providing a high profile image to our company’s key brands. Consumers are taking a more active role in their projects as they become more knowledgeable and participatory in their shopping experience. We believe this will continue to be more important well into the future.
Kymberly Weiner: The showroom business contributes more than 60% to our overall business and is not only very important today but will continue to be well into the future.
Ted Green: Today, showroom sales make up about 3% of our total sales. We plan to increase that to between 5-10% in the future. High-end housing design is being sold direct to the homeowner or designer and that trend is going to continue to grow.
Do you think there will be a need for brick-and-mortar showrooms of decorative plumbing products 10 years from now?
HF: There always will be a need for brick-and-mortar showrooms now and well into the future. Decorative plumbing beyond the purchase of a simple faucet or showerhead is a lot more complex. There always will be a need for professionals who can create a custom design and most importantly ensure what is specified will work in each instance.
JP: There will be a need for brick-and-mortar stores of finish plumbing products 10 years from now. As design and finish products continue to become more sophisticated, costly and with a greater variability of materials (metals, plastics, woods, stones, etc.) and quality, the need for consumers to be able to physically touch, feel and experience the products they purchase only will become greater.
KW: With such an important and large investment, people still want to touch and feel the products they are purchasing. Plumbing is technical and customers heavily rely on the knowledge and experience of brick-and-mortar staff.
TG: Even though 10 years is a long way into the future I believe brick and mortar still will be viable in this market because people want to see, touch and operate the fixtures they are going to spend so much money on. They also learn in the remodel and new construction process that having someone knowledgeable to talk directly with is important and a comfort to them.
I see companies such as Ferguson and Pirch and a few others going to larger showrooms and expanding product offerings? Is this a trend for the future?
HF: In New York City we are constantly battling the balance of space needs to square-footage price. I do not think bigger is always better. Better is better!
JP: We see this trend to be something the consumer neither wants nor desires in the future. Having multiples of the same products on display from similar vendors only makes the purchasing experience inefficient, needlessly confusing and an overall much more difficult consumer experience. We believe providing local stores with professional sales teams and high-quality products will be the keys to the future.
KW: I think diversifying our offerings is important for company growth.
TG: Retail space is expensive and selling just plumbing may not create the volume needed to offset the expense. I believe we will need to expand into lighting, appliances or cabinetry. Expanding into these areas also gives the showroom sales team the ability to sell packages to builders and homeowners.
Do you see technology continuing to play a more important role in the operation of showroom businesses?
HF: We continue to see the importance and try to work with new technologies in our showrooms and in the online world. We want to improve the customer’s ability to find us and begin a dialogue with us with the hope it brings them to one of the showrooms to close the sale. We expect handheld products with wireless connections (that integrate with our current computers) to allow our sales staff a more untethered workspace and interaction with a client. This would result in creating a better and more interactive experience with the client.
JP: Technology is extremely important for the consumer and will be even more important in the future as purchasing power in younger generations expands. Customers come into our stores based on selections they’ve already made by doing research on multiple platforms. They expect and want professional advice on how to put their selected pieces together in a way that fits their desired design, timeline and budget.
KW: I think technology in the showrooms will continue to grow, especially as technology in the bathroom grows. Generation X and below are more tech savvy and they want to purchase their products from people who are equally savvy. Over the next 10 years I think everything will be done with mobile devices and there will be some form of virtual bathroom technology.
TG: We continually are looking at technology to improve our operation in the wholesale business. We also need to look at it for the showroom business. The success will be based on the quality of experience by the end user. Understanding what Apple and other companies are doing is important for us to evaluate how we use the technology — not just for our staff, but also for our customers’ experience.
Most distributors have a mix of business from the trades and homeowners? Will this change in the next 10 years?
HF: We get a good mix of all three demographics. Plumbers help drive sales to the showrooms that are attached to the wholesale location, and we see a much higher percentage of designer- and architect-driven sales in our showrooms located in Midtown and lower Manhattan. We present ourselves as open and friendly to the walk-in trade and have retail hours of business to accommodate that purchaser.
JP: Absolutely not! The trades are important partners in serving the consumer and are important influencers in the consumers’ minds. Certainly the consumer wants to be much more participatory in making product and design selections, but they do look to the professional as a source of advice and ideas.
KW: I think the percent of business from homeowners will continue to grow.
TG:As wholesalers build more showrooms in true retail areas I see more of our business in this area coming from the homeowner, architects and designers.
In my opinion most wholesalers do not do a very good job of marketing their showrooms. They haven’t embraced the retail mentality it takes to operate a successful showroom. Do you agree with this?
HF: We have showrooms adjoining wholesale environments and standalone showrooms. It’s easier to advertise our standalone showrooms because it’s easier to identify and clearly communicate our message. I believe wholesalers have been on a learning curve and are starting to catch up and understand the distinct needs of how to market our strengths.
JP: In general, distribution does not always do a great job in marketing their stores as a place where consumers can purchase products and find design professionals. However, stores today are evolving with strong marketing programs based on key metrics. This includes everything from establishing consumer friendly hours on weekends and most holidays to TV advertising.
KW: If wholesalers don’t embrace the retail mentality in operating their showrooms, their showroom business will wither and die.
TG: In retail, marketing obviously is key, yet we as wholesalers struggle to understand how or where to spend marketing dollars that actually provide a return on investment.
Do you believe gross profit margins for distributor showrooms can grow into the high 30s?
HF: Gross profit margins in the high-end showroom business should be in the high 30s to remain profitable and allow for the growth and development to remain relevant. However, the pressure to match Internet pricing or beat local quotes to get a job, or lowering your own quote just to keep your customer who has price-compared are still the driving forces in GP margins. This is a struggle we all have and I don’t see it changing anytime soon.
JP: Yes, we understand the breakeven point of the kitchen and bath stores and we estimate our operating breakeven to be about $100 per hour, per person. In order to cover this level of cost and still return a profit, gross profit margins need to continue to grow and they will grow as we deliver more of the complete experience the customer is looking to find.
KW: Are other peoples’ margins really less than that?
TG: High 30s is where they need to be in order to pay the bills in a retail space. This means carefully selecting the product lines you display and encouraging your staff to sell the most profitable ones. The more exposure a product line has in the marketplace with pricing available to the customer, the harder it is to get the margins needed. We are not just selling product, we are providing a service that needs to be compensated for.
I’d be interested in what your responses would be to these questions. If you are so inclined, please forward them to me. It could make for another interesting article on the future of plumbing distributor showrooms.
Thank-you and good selling!