During Fall High Point Market \u2013 which is always a great opportunity for face time with retailers, designers, manufacturers, and sales reps \u2013 there were a lot of rumblings over evolving business models.<\/p>\n\n\n\n
In tough economic times, understandably everyone in the industry needs to maintain profitability or, at the very least, make every attempt to stay afloat. As a result, the sales channel waters are becoming muddied as many manufacturers expand their list of target customers. The proliferation of \u201cJoin our designer trade program\u201d messaging on social media and through email promotions to market attendees was evidence of an increasingly more assertive approach than in the past. Similarly, there was an escalation of atypical customers visiting market \u2013 home builders, interior designers, contractors, real estate agents masquerading as interior designers, and consumers \u2013 hoping to score generous discounts by circumventing the traditional channels of selling through showrooms.<\/p>\n\n\n\n
What makes it a \u201cdirty little secret\u201d is not<\/em> that this shift has been happening, but the denial<\/em> that it is happening. For every manufacturer that does not sell direct to designers or other channels typically serviced by lighting showrooms, retailers will tell you there are three more who do. Obviously, this is not a \u201cnew\u201d problem \u2013 it has been whispered among lighting showrooms over the past 10 years or more \u2013 but those dissenting voices are now getting louder.<\/p>\n\n\n\n Fortunately, the consumers who visited High Point Market exhibitors looking for a deal were turned away, manufacturers told me. However, the lines blur when other trade members ask for and \u2013 from what I\u2019ve heard \u2013 often receive terms normally reserved for stocking dealers.<\/p>\n\n\n\n To clarify: selling to interior designers at a discount is not<\/u><\/em> the problem. Manufacturers selling to designers, builders and contractors at the lighting showroom\u2019s cost is<\/em>. I have heard from enough lighting retailers at market \u2013 and in the days afterwards \u2013 that sales have become much more challenging in this environment of trade professionals going direct to a manufacturer and getting products at dealer cost. <\/p>\n\n\n\n As one showroom manager informed me, \u201cThere are designers and real estate agents out there who will tell their customers, \u2018I can get [the lighting] for you at my cost\u2019 and that automatically makes it seem like lighting showrooms are overcharging. That customer doesn\u2019t know that the [trade professional] is probably making up the difference from other areas in the project like fees. We\u2019ve also had designers who are getting the lighting from manufacturers at our cost and are then marking it up to what we would sell it for or more.\u201d In either scenario, the lighting showroom misses out on that sale.<\/p>\n\n\n\n The concept of showrooming \u2013 consumers visiting a lighting showroom to see various lighting products in person with the intention of purchasing for less online \u2013 has just ratcheted up a notch. <\/p>\n\n\n\n Another showroom buyer told me that a designer recently called the store to ask, \u201c\u2018We have most of our customers\u2019 lights selected, but they\u2019re stuck in a few places. Can we come in and use your showroom?\u2019 I said, \u2018Absolutely\u2019 \u2014 thinking she\u2019d get those few fixtures through me. They spent three or four hours in our store, looking at our displays, using our table, paging through catalogs and we never heard from that designer again.\u201d While consumers shopping in-store and buying online is no longer new, having that practice perpetrated by local trade professionals stings just a bit more.<\/p>\n\n\n\n The showroom buyer went on to say that some design firms are stipulating in their contracts that any<\/em> lighting has to be supplied through them. \u201cCan you imagine if a showroom tried to get a customer to sign something like that when we started the lighting plan for their house? They\u2019re not building relationships with the customer; they\u2019re not worried about repeat business. Showrooms, on the other hand, are trying to build foundations of service, quality, and reliability,\u201d the buyer said.<\/p>\n\n\n\n Meanwhile, lighting showrooms are still fighting the longtime perception battle that they are more expensive than other retail channels. When other trade professionals tell consumers they can get them the lighting at cost, it further erodes any desire for consumers to purchase from showrooms. It was just this past week after High Point Market that I\u2019ve heard about real estate agents approaching manufacturers and misrepresenting themselves as designers with the goal of getting dealer pricing so they can offer potential homeowners upgraded lighting fixtures at a markup \u2014 once again, cutting out the lighting showroom. <\/p>\n\n\n\n There are a few workable solutions that could mitigate this problem, showrooms tell me. Of course, number one is for manufacturers to uphold IMAP unilaterally. The second is for manufacturers to return to selling designers at a higher price than showroom cost; and a third option is to not set up trade accounts in areas where there is adequate distribution for the sought-after lines already sold through showrooms. <\/p>\n\n\n\n Another sticking point is putting limits on markup. One showroom manager remarked, \u201cWe\u2019ve had reps say they want to run a design business through us but tell us we can\u2019t put more than a 1.25 markup on it. So, manufacturers are making their money, and sales reps are making their money, but lighting showrooms are not supposed to make their profit? That sounds like the manufacturer is saying to showrooms, \u2018If you want this designer business, you can sell it to the designer and make very little profit on it. If not, we\u2019ll sell it direct.\u2019\u201d<\/p>\n\n\n\n It\u2019s easy to understand why lighting showrooms feel like they are at a disadvantage when compared to trade accounts who are receiving the same exact pricing. Showrooms are the ones spending on warehousing and deliveries, plus negotiating with manufacturers for displays and placing larger orders than they are comfortable with to qualify for galleries or freight promotions.<\/p>\n\n\n\n