By Michelle Malison, Research Analyst for Retailing at Euromonitor International
The rise of e-commerce has raised concerns regarding the role of physical stores for retailers, especially those in the fashion industry. According to Euromonitor International, 10% of apparel and footwear sales globally were made online, up from 4% in 2009. Fashion retailers around the world are experimenting with a new type of store format, the showroom store, to enjoy the benefits of a physical presence without the typical costs.
How do showroom stores operate?
In the past, shoppers were limited to physical stores to discover and purchase products. Shoppers would walk into a store, explore the range of product offerings, pay, and walk out with the purchased products. At showroom stores, the selling space is small with limited inventory. Shoppers try on products, but there is usually only one size in stock. The shopper receives personalised support from sales associates on fit and then the order for the proper fit or colour is made online.
Retailers typically minimise the selling space, inventory, store design and staff of showroom stores with the goal of utilising these stores primarily to provide customers with another access point to engage with the brand. The lower overhead costs of showroom stores enable fashion retailers to focus spending their resources on developing their brand and relationships with customers in a more efficient manner.
Showroom stores blend the physical with the digital.
The use of showroom stores is attractive to fashion retailers and shoppers alike for several reasons. For retailers, the smaller stores allow for lower overhead costs (real estate, inventory management, labour, etc) and enable them to draw in new shoppers who may not be aware of them, especially if the retailer historically only sold online. Shoppers are able to engage personally with the brand through showroom stores, receiving guidance and support from sales associates, and touch and feel the products in which they are interested, all the while enjoying the convenience of delivery. The showroom store is a unique format that integrates the benefits of both physical and online stores.
E-commerce players move offline.
Fashion retailers which previously operated exclusively online are moving into the physical realm using the showroom store format, illustrating the value of bricks-and-mortar stores to engage with shoppers. For example, Zalora, a fashion retailer that operated exclusively online, opened physical stores in Singapore (2014) and Hong Kong (2015). Instead of standing in line at cash registers and leaving with shopping bags, shoppers are asked to scan a QR code to download the Zalora app to their smartphones using the store’s complimentary Wi-Fi. Customers can examine the limited range of inventory at the store and place an order online using QR codes on the clothing labels. Shoppers leave the store without carrying any purchased products and their order will be delivered to their homes within two to seven days.
In the United States, Bonobos, a chic menswear outlet with a casual and summery positioning, introduced its “Guideshop” format. The shops are intended to introduce customers to the brand’s style via changing booths and knowledgeable sales associates to help familiarise the customer with the brand and its business model. The “Guideshops” only carry one item of each inventory piece with the sales staff creating an online account for the shopper and completing the purchase online for home delivery.
Offline players are also experimenting.
In January 2015, Hervis Sports, a sporting goods and athletic apparel retailer, opened its first Hervis Express store in Austria. The store has a selling space of only about 110 sq ft (compared to typical Hervis stores with an average selling space of approximately 11,000 sq ft) and offers a very limited selection of the retailer’s bestselling products. Shoppers still have access to the whole Hervis range via internet terminals placed within the Hervis Express store and can make purchases and have products delivered.
In the UK, House of Fraser, a department store group with over 60 store locations, has established two “buy & collect” concept stores, one in Cambridge and another in Edinburgh. The stores carry limited inventory and are equipped with tablets for shoppers’ use to browse through its online store and order products, in addition to fitting rooms and sales staff to provide assistance. Orders are delivered to shoppers’ homes or to any House of Fraser’s store for collection.
Other retailers, such as Macy’s and Target, are also experimenting with a similar showroom store format. In spring 2015, Macy’s allocated its swimsuit and workout sections to only display samples in one of its stores in California. Shoppers can utilise an app to have specific products in requested sizes sent to their designated dressing rooms.
In the case of Target, the company turned its patio furniture displays into showrooms in nearly 30 of its stores in Denver. Shoppers check out the products in stores but make purchases online for delivery. The strategy enables Target to carry limited inventory within these stores, and the company is now considering expanding the strategy to additional product categories.
Physical stores will continue to exist and evolve in line with consumers’ demands.
The role of physical stores is changing for fashion retailers in the omnichannel environment. For some fashion brands, having a physical presence is an essential tool for customer acquisition and branding. The showroom store format allows retailers to enjoy the benefits of a physical presence without all of the costs. While physical stores will remain under pressure from internet shopping, it is likely that fashion retailers will continue to experiment with store formats to deliver the best experience to their shoppers.
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