Retail specialist Professor Heiner Evanschitzky (pictured) is urging high-street retailers to radically rethink their business models. He believes they should move away from being a place where we physically buy ‘stuff’ to being a place where we can find inspiration and experience what we’re interesting in buying. Tim Wallace hears more
Q: How might a typical kitchen or bathroom showroom have changed in, say, 10 years’ time?
A: You will see more branded stores – showrooms from manufacturers. In other industries, you see strong brands wanting to create a pull from the market. So they communicate directly to the consumer through a showroom. I still think there will be small ‘local hero’ stores and they’re here to stay. They know the customer. They don’t need the complex data-mining software. I think it’s a case of branded showrooms versus local heroes. If you’re in the middle, it tends not to be a very good position. Either be very personal and individual and know the customer and cater 100% for their needs – or create a buzz from your brand.
Q: What kind of KBB retail model is the most resilient in this market? Who’s doing a good job and why?
A: Most towns have their local heroes who do incredibly well. Even though they’re small, they manage to have a very strong customer relationship. Mostly, it’s word of mouth. Whenever you have a purchase where the provider knows a lot, and you know very little, it’s about trust. They have their own personal brand – you buy from them because you trust them.
Q: So a dealer setting up a showroom tomorrow should trust in their own name rather than promoting the brands they sell?
A: Absolutely. Your name stands for the brand. It doesn’t really matter what brands you have in your store. People trust you.
Q: What about branded franchise operations?
A: I couldn’t point out a benchmark, but the franchising concept is suited to that kind of business. The supplier is trying to use the local knowledge of the franchisee, who knows the area. But they must be free to set their own prices. Some of it will be standardised, but there’s still a lot they can do in terms of the product assortment and catering that to the local needs.
Q: Do enough retailers understand how to get the most out of social media?
A: For that kind of product, it’s more about word of mouth. It’s a high-price item. I’m not sure that if someone tweets about it, it makes a difference. It’s more about personal recommendation in this kind of market. It doesn’t hurt if your market is predominantly young and is using new media, but I wouldn’t set up my marketing or communications strategy around social media.
Most towns have their local heroes who do incredibly well. Even though they’re small, they manage to have a very strong
Q: Are retailers who don’t focus on the over-50s and inclusive market missing a trick?
A: It’s a market most retailers largely ignore. One player who has a very good reputation and isn’t using it is Marks and Spencer. We’ve found M&S has the highest brand equity of all the major retailers, even higher than John Lewis. Food is doing incredibly well, but general merchandising isn’t really – fashion in particular. A second example is the DIY sector. The two most profitable segments are the 25 to 30-year-olds buying their first home, then the empty-nesters around 60 years old. But everything is geared towards the first segment and not the empty-nester. For some reason, they want to appear young and hip, even if their customers aren’t. They’re focusing on the wrong targets. They don’t need a 1950s-style ad campaign, but if they spent half of their marketing budget on understanding those customers, it would be much more useful than focusing on the young and the trendsetters.
Q: Where are KBB specialists getting it right and wrong in terms of showroom design?
A: Seeing the high-street store as somewhere to inspire the customer rather than a place to buy from is an interesting way forward. I don’t find showrooms very inspirational. They’re very factual. You see three rows of something – it doesn’t inspire me. If you go to an Ikea store or many larger stores, you see the product in use. You see the mini fake bathroom or bedroom. So you may go into that store and you buy a brand, but if you‘re inspired you see the side table, the lamp, the carpet. There are lots of cross-selling opportunities if you inspire the consumer. Show them 50 different products and, if you’re lucky, they’ll buy one.
Q: If you were setting up an independent kitchen or bathroom studio, how would you go about it?
A: Given the space limitations of the high street, I would try to create some kind of virtual reality with the product in use. There are furniture stores that try to create displays where they show little clips. So you have an idea of what you want, you touch and feel it, then the retailer shows you how it would actually work in your room and which other products you could use with it. That’s probably the way forward – a mix of traditional ‘touch and feel’ plus new media.
Q: So you think the future will be more about ‘brand experience’ showrooms?
A: It depends from which side you’re coming. If you’re the producer, what you don’t want is your product placed next to your biggest rival’s, which you have in a typical retail outlet. In that sense, you have to create a pull from the market where people request your brand and the retailer says, ‘yes, if you want that you can have it’. The retailer doesn’t really care, they just want to sell, but the brand producer wants to sell its brand, so the way to do that is to create that particular pull.
A: Manufacturers should have a single-brand showroom where you don’t have to buy anything. The whole idea of creating a pull is quite important, particularly when you sell a product where the brand is significant. The purpose is that next time they go to their little local hero shop, they say, ‘I went to the Rangemaster showroom and it was just brilliant and I want one’. That’s the idea, not necessarily trying to steal retail sales from a retailer. The store wouldn’t need to make money, it’s there to create demand elsewhere. The brand manufacturer refers the client to a small kitchen retailer.
Q: What do you make of Ikea deciding to open smaller, high-street stores rather than relying on out-of-town retail parks?
A: If I were an independent retailer, I would be a little bit worried. The idea is to experience the Ikea product. It lends itself to the mail-order business – it’s flat-pack anyway. So in those stores, you can trigger a lot of online transactions. It’s quite significant.
Q: Has the rise of online shopping made offering a genuine design service more important?
A: Yes. It’s about offering a complete solution to a consumer problem. But it’s quite difficult to turn that into a viable business model. Lots of customers steal that consulting service. They get all the information, a quote, then go online and purchase every product. That is a huge, huge challenge and nobody has really found a solution. Ideally, you would need to charge for services, but I’m not sure the consumer is ready yet.
Q: Is there likely to be a significant shift in the way KBB retailing is approached in the future?
A: I don’t think so. If one of the major manufacturers becomes serious about going into the market and selling direct, that could change things quite a bit. But do they really want that? You would alienate your distributors, who can do it much better than you. It could change the market, but I haven’t seen any moves yet. In theory, there’s nothing to stop it. But in practice, think of the margins you have as a retailer compared with the margins as a manufacturer. Selling is a different mind-set. Manufacturers and retailers need to talk to each other, but they’re not necessarily good at both. If you have a strong brand, you have a chance to sell direct, which would be great, because you wouldn’t have to share the margin with the retailer. But the retailer has advantages, too. You need to deal with hundreds of customer requests, you need a call centre and sales force. Arguably, that’s not your core competence. The fact that you can manufacture a high-end product doesn’t mean you can market it. It’s quite a difficult business.
Q: What do make of the rapid growth of websites like Victoria Plum and Better Bathrooms?
A: The more that your product is a commodity, the more you’re likely to be successful selling it online with little service and little information provided. As technology progresses, you can explain further and show more. So yes, there is perhaps a slow move towards that. But completely without a showroom? I’m not sure it’s going to work.
• Heiner Evanschitzky is professor and chair of marketing at Aston Business School in Birmingham