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Mike Root

Showrooming Updated

November 7, 2013

Last year I wrote about the phenomenon brought to us by the digital age called "Showrooming". Essentially the theory goes, brick and mortar showrooms act as showrooms for internet retailers allowing consumers to shop a local furniture store and then go online to see if they can find a better deal. Over the last year this trend has evolved from retailers, to factories and ultimately to the consumer. Here are a couple of observations regarding the state of the trend....

1. Big retailers are embracing this trend knowing that if the consumer can feel comfortable that the price they are paying is reasonable, consumers would rather work with a local store. On the front page of the Marketplace section this week in the Wall Street Journal the headline screams "Fear of Showrooming Fades". It cites the fact that Best Buy is running ads going into Black Friday to make them the "Ultimate Holiday Showroom" and offering to match prices. Nebraska Furniture Mart put boldly on the front of their holiday circular the following "We know their price and we've already matched it." Then it explains how they scan competitor's ads and adjust prices accordingly. Very powerful copy, and I am sure very helpful in validating the price in a consumer's mind.

2. Other retailers are benefiting from reverse showrooming when a customer shops online and then comes into a store to look at the product. Target has gone so far as to install wifi in its stores making it easy for customers to go online and check the prices.

3. The no sales tax advantage online retailers have enjoyed is quickly disappearing as more and more online retailers are being forced to collect those taxes. Local governments do not want to lose the sales tax revenue of products sold in their taxable jurisdictions and are aggressively going after online sales demanding their piece of the transaction. This in its very nature will make it harder for small internet companies to survive and actually may clean up some of the major online price guys like Billy Bob selling sofas out of his garage and a slim margin.

4. Factories are all over the board trying to figure out what to do about internet sales. Some embrace it and see it as an additional way to add revenue. One of my companies, COZZIA, has a very complex massage chair that truly needs to be experienced in order to get the $4000 plus retail. They have determined at this point that a majority of the line will not be allowed to be on the Internet forcing a consumer into a brick and mortar store to try the chair and get it delivered and setup by the local retailer.

The Internet is a very important channel to consider as the consumers flock there for information. How retailers work within this channel will be very telling. Some like Amazon, Wayfair and Hayneedle have determined this channel is their business and they all have done a great job of separating themselves from the pack. My guess is they will continue to be very successful because of the convenience they offer a certain segment of furniture consumers.

For true brick and mortar retailers, the Internet needs to be looked at a little differently. You can certainly try and compete with the online guys, but they build in free freight and have a different business model. I think the Internet needs to be looked at like a media --- much like their newspaper, TV or radio ads. It is a way to showcase what is in the store and convince the consumer there is the right product for them to come to the physical store. They can always go to the website after the fact and purchase the item, but the goal should be to get them into the store because that is where a brick and mortar guy can really overcome the Internet guys. Personable, knowledgeable, factory trained sales people should be able to win the sale with a competitively priced product. If people do not feel like they are being overcharged by a retailer, they would more likely like to buy furniture from a local retailer.

As for the reps servicing the dealers, it is still incumbent for us to make sure the sellers of our products have all the right info to convince the end consumer, whether that be online or in person in the store. It requires a new level of attention to details about product construction, quality, features and benefits. Gone are the days of giving a Saturday morning sales meeting and BS'ing your way through with a gregarious personality. The information we pass on to retailers needs to be accurate because they will pass it on to consumers through their website and online media. It doesn't matter if the retailer is primarily an Internet retailer or a brick and mortar store. The customer demands information and the winners will be the reps, retailers and factories that can best communicate their story through the channels to the end consumer.

As always, please weigh in with your thoughts about this trend of showrooming and if you think it is good or bad for the industry. There is nothing we can do about the fact that it exists so let's have a constructive conversation about it.