Given the obstacles facing retailers today, we believe that there is additional, largely complementary sales approach that retailers in some sectors should consider. They can replace underperforming stores and support e-commerce efforts with showrooms. Instead, a showroom offers items for inspection, gives advice on products, and takes orders. The products are then shipped to the customer’s home from some other location. But because retailers still aim to sell from their store inventory, they have to maintain the full range of existing store support infrastructure, making the current arrangement not economically beneficial.
Showrooms work best for differentiated goods. Their counterparts are common goods that consumers are very familiar with and that are essentially the same in every store. Common goods sell well online, but differentiated goods are harder to move via e-commerce; consumers may need or prefer to browse for these items, examine them, and even seek out advice about what to buy. Furthermore, if they do buy, consumers return differentiated goods at much higher rates.
Others business models have all the advantages of a high-end, high-touch retail store. Customers can try on clothing, get plenty of advice, and be enticed with possible accessories and add-ons. At the end of the sales appointment, the goods are ordered online and shipped to the customer at home. This save money by requiring fewer salespeople and having smaller footprints than a traditional retail store. Furthermore, since customer details are recorded in the data system, customers are more likely to make online purchases unassisted in the future, driving customer loyalty and lower returns, even for e-commerce transactions.
This model essentially combines experience retailing and efficient inventory management. The store’s space can be used for displays and visual merchandising and actual goods for sale can be held at a few central fulfillment centers, rather than at numerous retail outlets. Pooling inventory in a small number of warehouses makes forecasting sales volumes and stock levels much easier because volatile demand tends to smooth out over the showroom network.
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