Showrooms:
Embracing Web orders D3
There was a time not so long ago when the word “showrooming” was the most profane word in retailing.
The term refers to physical stores serving as little more than showrooms for people who want to see the merchandise in person but ultimately intend to buy it somewhere else. For example, consumers visit a Best Buy store to examine a television and then later purchase it on Amazon, often at a cheaper price.
Today, companies of all stripes proudly show off their showrooms — and they don’t care if you buy on the spot.
Last year, Target unveiled Open House beneath its Metreon store in San Francisco to educate consumers about how the Internet can link together disparate household devices. This month, AT&T opened a 23,000-square-foot space at the old Bank of Italy building near Union Square, designed to demonstrate the latest in media technology.
“It’s the perfect space here in downtown San Francisco,” said Allie Borg, vice president and general manager of retail sales and services for AT&T. “What you should feel when you walk in here is celebration of our history as an innovator.”
Tesla recently opened a flagship store on Van Ness Avenue and O’Farrell Street, in the heart of what once was San Francisco’s Auto Row. The electric automaker in Palo Alto occupies a threestory, Art Deco dealership built in 1937 for Chevrolet. In 2017, furniture maker Restoration Hardware in Corte Madera will debut a five-story, 60,000-square-foot showroom in the historic Bethlehem Steel administrative building on the corner of Illinois and 20th streets at Pier 70 in San Francisco.
And of course, the Apple Store is the one showroom that many retailers, whether they like to admit it or not, love to emulate, if not blatantly copy. So what has changed? A few years ago, Amazon was stealing quite a bit of market share from brick-andmortar chains because of its reputation for convenience and lower prices. In addition, traditional retailers didn’t have particularly good ecommerce operations: The digital and store sides of the business worked in silos and often competed for resources and clout within the company.
But retailers eventually started to price-match Amazon more closely, so consumers could buy merchandise at the store instead of online — thereby eliminating the showroom effect. They also started to better integrate brick and mortar with e-commerce, including the option to pick up online orders at physical stores.
Moreover, retailers started to use their store space in more creative ways: Best Buy, for example, focused heavily on partnering with manufacturers like Sony, Microsoft and Samsung to open special store-within-store concepts.
“Showrooming was once portrayed as the No. 1 threat” to brick-and-mortar retail, said Carol Spieckerman, founder and president of the Spieckerman Retail consulting firm. “But retailers have definitely chilled out. They are now looking at their stores as assets. They are asking, ‘What are we doing to make the most out of the specific space we have?’ ”
For example, at Target’s Open House, consumers can purchase a variety of “smart” devices such as home thermostats that can be controlled by a mobile phone or coffeemakers that automatically brew at set times. But the real point of the store is not to sell but rather to educate and learn, said Gene Han, a vice president who heads Target’s innovation center in San Francisco.
“There’s no substitute for direct consumer feedback,” Han said. “These products don’t sell themselves, and we are trying to tell a bigger story. We’re asking Americans to become the technologists of tomorrow.”
For a brick-and-mortar retailer to not focus on pushing sales represents a sea change in culture. After all, Wall Street tends to measure retail performance by quarterly sales at stores open for at least a year.
Target, however, sees enormous potential in the emerging Internet of Things category, in which a number of Internet-connected devices can work together to automate tasks and solve problems for consumers. It’s a complicated concept, which is why Target felt the need to build a showroom to demonstrate the technology.
“Just like any (very large) company, you’ve got to make a commitment to research and development,” Han said.
Making immediate sales is not the only purpose of the Tesla store, either. Uncluttered and sparsely decorated, each store has a handful of cars for test-drives. But the stores largely focus on teaching potential customers about the brand. Buyers can order and customize a Model S or a Model X at a Tesla store, but they can’t drive home with one.
Whereas carmakers primarily distribute vehicles through physical dealerships, analysts think such locations will increasingly serve as showrooms to push consumers to purchase cars in cyberspace.
“New cars will be sold via a number of channels, leveraging the existing dealer network and new flagship stores, but also through online and mobile channels, with sales staff even traveling to customers to showcase the vehicles digitally,” according to a 2013 report by Frost & Sullivan.
Leasing space, especially large amounts of real estate in prime locations in New York and San Francisco, is an expensive proposition, so stores still need to financially justify their existence. Retailers are trying to balance the desire to educate and entertain but also generate sales, Spieckerman, the retail consultant, said.
That tension is best illustrated in the new AT&T store. On the bottom floor, AT&T is selling the usual mobile phones, accessories and other services. But on the second floor, AT&T is using large touchscreens, animation and even a hologram to educate consumers about “connected homes” and “smart cities.”
“We want to sell because we are still a retail space,” said Devina Ewing, AT&T’s area store manager. “But one of the nuances that we do here is to integrate these stores by explaining to customers all of the services and products we have.”
“Of course, there will still be numbers, and internally that’s what we will be reporting, and there will be focus on performance,” she said. “But ultimately it’s about connecting customers to the AT&T brand.”
“Showrooming was once portrayed as the No. 1 threat. But retailers have definitely chilled out.” Carol Spieckerman, founder, Spieckerman Retail