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DPH Perspective { Steven Weinberg } Are You Ripe to Be 'Showroomed?' The practice of 'showrooming' – where consumers use DPH showrooms to view products that they then buy online – is a growing threat, but DPH pros can counter this by maximizing their value proposition. I n an age where smart phones are increasingly prevalent and online shopping continues to grow, decorative plumbing and hardware professionals must be aware of the very real threat of "showrooming." Show room i ng is t he practice of customers coming to a brick and mortar store, checking out the merchandise and then finding identical or similar products at a lower price on the Internet. The most prominent victims of showrooming have been big-box stores such as Best Buy, Target, JCPenney and Kmart. These retailers serve as "showrooms" for Amazon and other etailers. Best Buy and Target are starting to fght back by ofering to match any price found on the Internet, but they remain at a disadvantage until the entire nation requires etailers to pay state sales taxes. According to an article in The Wall Street Journal, Target is working with its suppliers to create unique products that would only be available in Target stores. However, these efforts are unlikely to curb Amazon's and others' ability to offer products cheaper than brick and mortar retailers. The cost structures and business models are diferent. As The Wall Street Journal points out, "Amazon can sell products so cheaply because it uses its other proftable units – such as data storage and fees it charges others to sell of of its Web site – to subsidize the rest of its business." Sucharita Mulpuru, a retail analyst for Forrester Research, wrote in an HBR blog, "Wal-Mart and Target are willing to sell a few things at a loss. Amazon's whole business is a loss leader." That's the reason Amazon is winning the in-store war. A THREAT TO DPH PROS? So, how much of a threat is showrooming to decorative plumbing and hardware? According to a July 2013 study, Dynamic Pricing in a Smartphone World, A Shopper Showrooming Study, the threat is ominous and growing. Parago's Dynamic Pricing in a Smartphone World found that showrooming is up 400% in the last year. That fgure should send shock waves through our entire industry. A Pew Internet Study conducted in May 2013 found that 56% of all adults 18+ have smartphones and 33% of smartphone owners are using them to price-check while in a brick and mortar store. Parago's study found that 59% of households with incomes in excess of $200,000 – the DPH industry's sweet spot – make purchases from their phones while in a brick and mortar store every week. And price really does matter the most unless the retailer can establish trust and explain its value proposition. Half of all shoppers, Parago found, will buy a similar $500+ item at Amazon if it costs 5% less – even if the product is not an exact match of what they are looking at. Research by L2: A Think Tank for Digital Innovation confirms Parago's findings. L2 found that 58% of smartphone users will go to a brick 18 | Kitchen & Bath Design News September 2013 and mortar store with the sole intention of trying or testing products before purchasing them online. L2 estimates that almost 50% of online sales are the result of showrooming. FIGHTING SHOWROOMING How can you fight showrooming? Some retailers are stepping up their game by offering improved in-store experiences that demonstrate the value of buying from a brick and mortar store and the premium associated with it. Showrooms will need to capitalize on the advantages created by having the opportunity to meet face to face with potential customers. If your staf is only capable of taking orders, you're in trouble. If they know and can sell the value proposition that you ofer, then you have more than a fghting chance to win customers over. Trust is another arrow in the brick and mortar quiver. While many retailers, due to their poor customer service, have lost the consumer's vote of confdence, that's not the case with specialty retailers. Most customers come to showrooms not focused on buying products per se, but rather on obtaining guidance and expertise to complete their jobs. They don't necessarily know what they need or what they want or they may just have enough information to be dangerous. Trust can be won by leveraging your experience, knowledge and sales capabilities that prove your value proposition. But will this be enough? Dynamic Pricing in a Smartphone World also found that 88% of shoppers will purchase online if an in-store product is priced $500 and it costs $425 online – a savings of 15% or $75. Parago reports there is a "silver lining" for brick and mortar stores: More than 60% of customers will buy from a brick and mortar store across all income levels and retail categories if online pricing is matched with instore rebates. Yes, there probably aren't too many DPH brick and mortar showroom owners who would view price matching as a "silver lining," even with in-store rebates as opposed to simply lowering the price to match what is available online. If brick and mortar DPH showrooms have to compete you want to truly maximize your proft margins, and increase the odds of closing sales, then emphasizing lines that decrease your chance of being undercut online should be a central part of your battle against showrooming. This is not to suggest that in-demand, big brands should not be part of the merchandising mix, but the focus needs to be balanced. Are you devoting the lion's share of your space to low-margin, highly shopped brands that are featured at the big national chains and sold at deep discounts on the Internet? Or is your focus on selectively distributed lines with enforced Internet policies that signifcantly increase the chances of providing you with both higher closing rates and larger proft margins? Think of your showroom as the board game Monopoly. "Trust can be won by leveraging your experience, knowledge and sales capabilities that prove your value proposition." solely on price, they more often than not are going to lose. If you can't win the pricing game, another obvious strategy is to ofer exclusive, limited distribution merchandise. While that sounds like a winning proposition, only a small percentage of DPH products are truly exclusive or unique. And there are many products that are similar to those exclusive products, which erodes their competitive advantage. If you don't want to compete on price matching, then your best bet might be to partner with manufacturers whose products are protected by a rigorously enforced Minimum Advertised Price (MAP) policy or an enforced minimum sell price policy. If Diferent board spaces have diferent values. The spaces in the front of the showroom are often the areas of higher visibility and therefore have greater trafc fow. Knowing the value of space in your showroom and lines that offer higher margins should help you rethink your showroom displays. Brands that ofer limited distribution and protection from Internet discounters are assuredly going to bring you greater margins than those that come with downward pressure either from the mass merchants or the Internet. Beyond increasing margins, they will also help you increase the odds of closing more sales. Use this knowledge to allocate space and position your Read past columns and features and send us your comments about this article and others by logging onto our Web site: www.ForResidentialPros.com