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To beat showrooming, change the showroom

June 13, 2012 by Chris Petersen — Owner, IMS

Almost every other retail headline is about the growing tide of online sales and the rise of mobile shopping. CEA just forecasted that more shoppers will shop for Father Day gifts online than in-store. Traditional stores are scrambling to stop the growing trend of "showrooming" – consumers shopping for lower prices on their smartphones in the aisles. Maybe it's time for retailers to take a look at IKEA, who produces a-mazing results by virtue of the very nature of the "showroom" itself.

Product centric versus consumer centric experience

Pre-internet, department stores ruled the day and typified retail merchandising – product displays by departments segmented by categories. Mass merchants simply built bigger "boxes" (stores), cut the "frills" and literally stacked products on shelves by categories and prices. Many of today's retailers are still clinging to this strategy of product centric, category merchandising, especially consumer electronic stores.

Only one problem. The internet is not necessarily linear or categorical. Yes, you can search for a specific brand, product and price such as a Canon EOS digital camera. But, you can also go off exploring on how to take better photos. A consumer driven quest can lead to searching for a solution that is comprised of a camera, lenses, printers or even software like Photoshop. Yes, you could potentially find all of those in a store. But all too often, cameras are in the camera aisle, printers in a different category in a different part of the store, and I haven't seen any stores carry much software, let alone something as expensive as Photoshop.

Internet wins hands down for commodities at a price

Do the math. The internet retailer will be the lowest price source for most products. Pure online retailers have some infrastructure costs for websites and service, but they have no operating costs associated with physical stores and people to staff them. E-tailers typically collect payment immediately via credit cards, yet don't have to pay suppliers for 30 days or more. And, despite "merchandising" millions of products, their inventory turns are very high, because they don't have to stock shelves with products in hundreds or thousands of stores.

The list can go on and on. In short, ecommerce has the business model of being able to sell specific products at a lower price than bricks and mortar stores. The consumers know it, and they are increasingly purchasing "items" online. Even worse for retailers like Best Buy, consumers are literally going to their stores to see and touch products, and then turning on their mobile device to find a cheaper price and purchase online ... "showrooming". We previously covered this in our post: Will Target and Best Buy Avoid "Race to the bottom"?

The Overlooked Differentiator – The showroom itself

To survive in retail today, retailers must differentiate themselves on at least a couple of dimensions. There are in fact a limited number of ways retailers can differentiate value to consumers. In terms of the Ps of retailing, there are at least 5 essential differentiators: Product, personalization, people, process and place.

In today's world, you have to include a 6th ... Price. Amazon and Walmart dominate in product and price. Except for fashion (and Apple), relatively few retailers are focused on store design as a primary differentiator that can change consumer experience, and the psychology of how they buy.

IKEA = Swedish for an a-MAZE-ing retail showroom

Love it or hate it, IKEA stores are constructed as a maze to take you on a "journey" that is the IKEA experience. And, in contrast to the growing trend of building smaller stores, IKEA stores are massive – the new store in Montreal will be over 450,000 square feet. They have to be massive in order to accommodate the unique store labyrinth that creates the carefully crafted consumer journey experience:

• Path takes you through rooms setup like your home
• The first few rooms are "inspirational"/aspirational
• The journey winds through 54 inspirational rooms
• There are as many as 3 full "home" settings"
• The journey encompasses at least 1.5 kilometers
• It takes a minimum of 30 min to walk the maze
• Most buy AFTER experiencing the relevant rooms
• At the end you are rewarded with a restaurant featuring Swedish meatballs with seating for hundreds of people

Results Count ... IKEA has a formula for success

IKEA attracts more than 700 million visitors to their stores annually. And by design, the IKEA showroom takes each of them on the consumer journey and experience of what IKEA can make possible in their homes.

Instead of product centric merchandising, IKEA's showroom is perhaps the ultimate place merchandising, where the consumer solution is focused on the most personalized dimension – the consumer's own lifestyle and living space. By design, IKEA's stores are one of the most "sticky" ... consumers spend a lot of time there. IKEA is also one of the best at "market basket" attach – getting consumers to buy things they never intended shopping for (including Swedish meatballs for lunch).

Why IKEA's maze works for them

IKEA is not the only retailer to capture the psychology of the human experience in their store design, but they are certainly a master at using store design to change the psychology of buying because you are excited about possibilities, versus shopping for cheapest.

According to Golden Gate University consumer psychologist Kit Yarrow in "Enter the Maze":

"In IKEA, people think to themselves, 'You know what, if we got fancy cushions to go on this couch then we could rotate the color scheme. And what about an area rug? You know what, we should really get some lamps to go with that, too. Or curtains. Or candles. Or a decorative tray. Or that ceramic monkey. See? Look how that makes the room."

Professor Yarrow went on to state that by turning shopping into a form of entertainment — think unbelievably cheap meatballs and a children's playpen filled with multicolored plastic balls — IKEA has outwitted its competitors and mastered the art of keeping a customer in the store.

IKEA's store design strategy is to take you past everything, get you excited ... and the result is that you buy stuff you never intended to buy. Now that is the art of retailing!

Gee ... I know a few consumer electronics retailers banging away on low price and struggling to drive traffic to stores. Maybe they need to go get some Swedish meatballs for lunch and rediscover the power of showroom design.

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