Yes, consumers are savvier than ever when it comes to product research and making purchases, but opportunities abound for showrooms that successfully bridge the online and offline world of sales, understand the value they bring to the table, and know how to communicate that.
The right stuff
Two companies that have successfully built strong “bricks and clicks” business models are Shades of Light in Virginia and Lightology in Chicago. Both started with physical locations serving traditional local markets, and later expanded by developing websites that have become key drivers of their sales.
Steven Schranz, VP/Sales & Marketing at Lightology, echoes the retail advice shared by many industry analysts: Build a strong online identity to support and complement the bricks-and-mortar location. “Having an ecommerce presence is critical and should be a core component of a retail operation,” says Schranz, who has has spent 14 years in the ecommerce sector, the last few of those with Lightology where he manages national sales, marketing, and vendor relations.
As retailers build the right strategies for their target markets, it’s important to first recognize that typical lighting consumers can comparison shop instantaneously on their mobile devices. The only way to compete against that is with service.
“We have to anticipate what the informed consumer expects in a luxury market and exceed those expectations with our level of service,” Schranz advises. “Companies that adapt quicker and meet customer demands will outperform their competitors. The ability to adapt to customer expectations in an information-fluid environment is a challenge for both retailers and the manufacturers who help them fulfill their commitments. Vendor partners who understand customers – and have the agility to help meet market demands – can earn the loyalty of strong retailers.”
Schranz adds that agility and excellent customer service aren’t enough without a variegated sales approach. “At Lightology, we strive to provide best-in-class service to our customers through several sales channels.” The company offers in-store experiences and design consultations, online shopping, phone consultations, and live chat. “Lighting can be very technical and complex to many buyers. We want our customers to think of us as their go-to resource. Lighting shapes daily experiences at home or at the office, and we understand how much these decisions matter to our customers. With our experience and expertise, we are here to guide them during the buying process. I think that’s what makes us different.”
According to Schranz, Lightology is constantly scouting domestic and international markets for new designs, brands, and technologies to offer. “Technological advances in LEDs like tunable white and warm-dim let us offer and build more comfortable living environments through better lighting. Between this and the growing smart-home movement, we see tremendous growth potential in our industry ahead,” he notes.
Through its showroom in downtown Chicago and dynamic ecommerce site, Lightology sells 500+ brands to the retail and trade market. “Our showroom has been known as a pioneering retailer,” Schranz says. “It’s a destination store that not only draws foot traffic from a local market, but also brings in customers from out-of-state and abroad. Once we identify a potential customer, it’s our job to retain and remarket to them.”
Lightology engages in targeted marketing efforts that identify browsing and buying patterns, and then crafts targeted digital marketing campaigns relevant to the interests and activities of customers. “For example, if someone lives in our surrounding states and is a repeat customer, we fine-tune their messaging. We invite them to visit our showroom and see our latest displays relevant to their buying habits on their next trip to Chicago,” he explains. The philosophy is to create a seamless omni-channel experience for customers, whether they walk through the doors of the showroom or use the website.
On branding for the showroom and website, Schranz relies on setting and maintaining standards at every operational level. “We want to ensure that all of our customers have the same high-quality experience through any sales channel,” he comments. “We keep our platforms consistent with all in-store product information – including specs – feeding from the website. The showroom is highly curated, but represents less than 1 percent of the products we have access to. Our database is synced to include the showroom and website, and the millions of products that we have access to sell. We must make sure that what we show online and in-store is integrated and representative of our brand.”
Not only does Lightology have an in-house marketing team, but it engages niche third parties to develop diverse digital marketing approaches. This way they can leverage a variety of available tools and technologies to reach its target markets. Schranz uses his experience to determine the most effective marketing method for each customer base. He also looks ahead at evolving marketing trends to determine new investments the company should consider.
“Augmented reality is coming soon, although there is not enough lighting content available yet,” Schranz remarks. “It’s still a very expensive implementation, and most of our customers haven’t had exposure to it yet. However, in the near future, I believe it will become a critical tool for any sales department. Even though we might not be ready to invest or put much time into its integration right now, we’re still keeping our eyes open at what’s ahead.”
Sharing Shade…er, Trade Secrets
Bryan Johnson of Shades of Light began his career in a much different setting than lighting, but that experience has been extremely beneficial. As CEO, he is involved in many aspects of the organization, most heavily in the oversight of merchandising functions such as catalog production, hospitality sales, and the buying and purchasing departments. At Shades of Light, the buying department manages item selections, product development, and categories, while purchasing focuses on in-house inventory.
Johnson got his start as an investment banker with a middle market boutique firm doing mergers and acquisitions. After more than one decade of working with entrepreneurs as clients, he caught the “entrepreneur bug” and began searching for the potential opportunities.
“At around the same time, I learned that a close colleague of mine at the investment bank, Chris Menasco, was also looking to strike out on his own, so we agreed to team up and started looking at acquisition opportunities together,” Johnson recalls. “Fortunately, I was introduced to the owner and founder of Shades of Light and we ultimately struck a deal to buy the company [in 2011].”
Shades of Light opened its doors as a traditional brick and mortar in 1986 and launched its website in 2002. While there are fairly obvious differences between the two, there is one common thread: “You can build a fabulous showroom filled with great product, but if you put it out in the middle of nowhere with no traffic, you still won’t generate sales,” Johnson remarks, adding, “The same can be said of websites. You can invest a small fortune in building out an ecommerce website, but if you don’t have any traffic, you won’t generate any sales.”
Managing this level of broad presence and ensuring that all segments are operating seamlessly isn’t easy. “It’s all about integration and reporting,” Johnson says. “To keep all of our sales areas well-aligned, we make sure that new products, pricing and cost updates, promotions, etc. are synced across all channels. We also have internal reporting designed to keep the showrooms abreast of any new products.”
When it comes to web presence and search engine positioning, Shades of Light outsources its pay-per-click and SEO marketing to an agency. Menasco and Shades of Light’s internal IT department work closely with that agency to stay on top of the technical aspects that can make or break SEO.
Interestingly, Johnson said that the company’s sales can be attributed to essentially the same mix of customers across all three of their sales channels – showroom, catalog, and website – and that their sales are within approximately the same price points.
“Our primary customers are female shoppers making purchases for their home – or in many cases a second home – as well as interior designers and buyers for hospitality groups like hotels, retail chains, restaurants, and bars,” Johnson comments. “We spend a lot of resources on customer acquisition, both via the catalog as well as online. There is a fair amount of modeling and analytics that go into targeting new customers for any of our marketing channels. That information is typically generated by third-party service providers.”
Social media has also begun playing a major role. “We see strong customer engagement on all social media platforms and it’s an important touch point for retailers to reach potential customers as they go through their decision-making process,” he notes. “It’s not uncommon for customers to have “wish list” boards with their favorite products, so imagine the engagement (and ultimately sales conversions) when price drops or promotions can be passed through those same platforms and show up directly on the customer’s wish list.’”
Customer feedback indicates that they care about the added value they experience when doing business with a company like Shades of Light. “It really comes down to individual preferences and personalities,” Johnson reveals. “We get requests from customers to help them select $300 chandeliers as well as $3,000 chandeliers.”
There are several key differentiators that Johnson believes sets Shades of Light apart:
- Maintaining a curated product assortment, “we do our own in-house product design and development.”
- Operating a UL-certified production facility (in Virginia) where we fabricate our own designs.
- Maintaining inventory levels in an 83,000-sq.-ft. distribution center as opposed to being a pure drop-ship model that has to rely on manufacturers’ inventory levels.
- A true focus on customer service.
“We take pride in what makes us different and communicate it across all channels, whether it is online messaging of our value proposition, e-mail communications, or in hard copy print,” Johnson states.
In this world of immediate satisfaction, when many customers are used to getting 1- or 2-day shipments from major online retailers, it’s critical that companies like Shades of Light can provide timely product delivery. Having their own distribution center is a huge factor in making that happen.
“We also understand the importance of ‘messaging’ to consumers when they are at the point of making a purchase decision,” Johnson notes. “If we have [a product] in stock in our distribution center, that is conveyed directly to consumers on the product pages. If it is not in stock, we display the approximate lead time it will take to procure it from the manufacturer in order to set realistic delivery expectations.”
Shades of Light does not rely on vendor promotions to encourage sales and doesn’t use its marketing to promote specific manufacturer brands. However, it does appreciate doing business with manufacturers that support their retailers by having established IMAP pricing policies.
“While we know it’s a problem in the industry, we’ve seen in recent years that many manufacturers have announced their IMAP policies, which has helped quite a bit,” Johnson says. “Fortunately, as a business owner, you can choose how and with whom you conduct business, so we choose to only deal with manufacturers that have strong IMAP policies and who also proactively enforce those policies. We are also able to mitigate this by focusing on our own unique designs developed internally — which now accounts for a significant portion of our business.”
The MAP connundrum
Once showrooms have defined their goals for an online presence, identified the messaging they wish to convey and how it should be structured to complement their physical location, and then implemented the right technology and support team to make that a reality, there is just one final hurdle — a level playing field on the advertised price of products.
It’s not a secret that manufacturers have traditionally provided pricing incentives to high-volume customers. However, for the manufacturers and their supply chains to be successful, they need to be profitable. That means retailers and etailers need to stay within the parameters of the minimum advertised price (MAP) for their products. Manufacturers recognize it’s a serious issue when any of their accounts is advertising below MAP because it can wreak havoc on the supply chain.
In an effort to combat this, many vendors have retained the services of technology platforms like mySamm, an enterprise-level internet account management solution founded by Justin Rychak. The first version rolled out about seven years ago, with lighting as its initial target market. Today, mySamm represents just over 100 brands. In a nutshell, mySamm helps manufacturers effectively manage and grow their ecommerce channel by providing business intelligence, identifying their strong-performing accounts and effectively enforcing MAP policies.
The mySamm system regularly scans about 30+ million URLs to monitor advertised prices of mySamm customers’ products. Whenever it detects that an etailer is in violation of the manufacturer’s parameters, the system generates a date-stamped screen shot and sends an email notification to the manufacturer, who can then in turn reach out to the etailer.
Rychak’s background as a strategy consultant, banker, and statistician proved to be an ideal formula in developing mySamm. Rychak had always wanted to be an entrepreneur, and ecommerce seemed like a natural evolution.
“We are constantly updating and evolving our solution as we better understand what our clients need to do to grow their businesses,” Rychak states. “We continue to add features that are important to our clients because we want to help them take their businesses to the next level.”
These services have been extremely effective, as evidenced by mySamm’s high client retention rate. Manufacturers want all of their supply chain partners to make a profit, and most don’t want to do business with a retailer that is causing problems and disrupting the channel. Likewise, brick-and-mortar showrooms appreciate when a manufacturer takes this issue seriously and enforces it.
“Different manufacturers have different consequences when they discover an account in violation of MAP pricing,” explains Rychak, who is a firm believer in the ROBO concept (Research Online, Buy Offline). He says that roughly 80 percent of people coming into a brick-and-mortar showroom have already done online research about the type of product they’re looking for, and he believes that number will continue to rise. However, he adds that most customers still would rather touch and see a product they see value in – such as a lighting fixture – rather than order it online.
“It’s time that showrooms get into the game on this issue,” Rychak remarks. “For them to succeed in the years ahead, they’ve got to embrace ecommerce and keep up with the technology. I think everyone understands that the internet isn’t going away, but where many have difficulty is in determining the changes that they need to make to their business and how to implement them.
“There is still plenty of opportunity for brick-and-mortar businesses ahead. Most manufacturers realize that the offline world is just as important as the online world. This is still a people business.”