Opening a Showroom
In today's market, a retail showroom location may be a liability, not an asset, according to some. November 11, 2005
We are growing our custom residential cabinet company fairly rapidly. We currently have a small showroom within the space of our 5000 sq. ft. shop. Our shop is not in our typical market area. Most of our work comes from a general area 15 to 20 miles away. We are considering demolishing our existing showroom to free up valuable manufacturing space. In turn, we are considering renting space in a very affluent shopping center. We would try and recruit a CKD to run this showroom. Does anyone have any thoughts on this idea? Some of our concerns are that we would be competing with some of our builder and designer accounts, and the upfront high setup costs seem to be approaching $100-150K. Do you think a skilled designer/salesperson generate the needed $1M in sales needed to justify the showroom? Are we making a mistake trying to become a manufacturer and a retailer? Any comments would be greatly appreciated.
From contributor A:
It is very encouraging to hear that you are looking to expand. In the late 70s and all through the 80s I worked in very nice custom showrooms and had very good results. Today, business has definitely changed along with the demographics of the clients. The area where you would think a nice showroom would be an asset is really a liability, with the high lease costs and the related support costs that have greatly outpaced profits over the last 20 yrs. The clients I see are spending big dollars but they are looking for bargains. Even when I show up in my Mark VIII instead of my regular SHO ride the clients make remarks like "We don't know if we can afford you". I never used to bargain on cost that much, but now it seems to be the number one point with the clients. They seem to want more sawdust on their shoes than in the past.
From contributor B:
We both have very similar situations. We too are looking into opening up a showroom near customers. But instead of getting a high profile high cost retail space, we are going more off the beaten path. I hate walk-in customers as 98% of the time they are timewasters. Just like you, most our work is referral and repeat designer clients. They just need a place to see some work. You donít need all the bells and whistles and high costs of a storefront. Get something in the heart of your sales area that is convenient to get to and use the money saved in rent to direct market. You and your sales staff will waste many precious hours talking to people who will never buy in a retail setting like that instead of spending time closing deals with serious prospects.
Also have you considered doing a show house? I am also looking into doing that along with or instead of showroom. You have to look at your 3-5 year total costs for showroom. They will be much more than the number you figured.
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