Making it work
Bonobos, a trendy men’s clothing company that caters to 18- to 40-year-old men, aptly illustrates the showroom retail concept. Since 2012, the company has been experimenting with showrooms it calls Guideshops, now in 30 locations. Consumers can walk in or book an appointment, and have a beer or a drink of water as knowledgeable salespeople called ninjas take measurements and help sort styles and sizes.
Guideshops 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. “We said we would never be offline, and then, wait a second,” Bonobos CEO and cofounder Andy Dunn told the New York Times in 2014. “We hit a big turning point. We realized offline really works.”
Guideshops save money by requiring fewer salespeople and having smaller footprints than a traditional retail store. Furthermore, since customer details (such as sizing and favorite styles) are recorded in the Bonobos 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.
Moreover, the inventory savings are striking. We estimate that in its denim jeans inventory, Bonobos showrooms need to stock only around 220 items to cover its style/size/wash assortment. In contrast, a typical specialty apparel store might stock in excess of 3,600 items in jeans alone. And a Guideshop showroom avoids the expensive infrastructure needed to support physical stores, including complicated supply chains and point-of-sale systems with sophisticated bookkeeping and accounting backbones. When consumers are ready to make a purchase, the ninja simply hands them an iPad and helps them make an online purchase in the routine way they would if they were at home on their couch. Crucially, the sale is consummated on the spot, eliminating the possibility of cart abandonment partway through the purchase, a frequent occurrence when shoppers initiate transactions on the Web, as well as the risk that the customer might leave the store and choose later to buy similar items from another retailer.
Other retailers, including Haier (the Qingdao-headquartered appliance manufacturer, in its own stores in China), Hointer (a Seattle-based apparel retailing startup), Paul Evans (a New York-based men’s shoe store), Restoration Hardware (an American home furnishings chain), and Zalora (a fashion emporium in Southeast Asia), have adopted the showroom model. Many of these companies carry higher-end furniture or apparel, which are prohibitively expensive to stock in quantity. There is thus a natural transition to the gallery approach, where retailers can offer shoppers a sense of how these products look and feel in real-life settings in the case of furniture or in a more casual, less rushed environment for trying on clothing with attentive sales experts on hand.
This model essentially combines experience retailing — a popular concept these days in the industry — 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.