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Manufacturers Can Learn From Showrooming

The electronics industry can capitalize on the disruptive concept of showrooming, but such a new supply chain business model requires novel ways of thinking to slim down and cut costs.

The electronics industry has a new opportunity to redesign manufacturing and distribution processes that can potentially cut production time and costs. The thinking stems from a retail model called showrooming that is causing problems for brick-and-mortar stores.

Despite retailers' best efforts to keep consumers buying in stores, 40 percent of Americans have looked up product information while standing in a store, then left to purchase it online, according to a recent Harris Poll.

For electronics, the idea means starting with lean manufacturing processes, building sophisticated online ordering platforms that tie to procurement and replenishment systems, taking advantage of cross-docking models, and enabling manufacturers to drop-ship products directly to consumers or shared distribution center rather than require retailers to stock the merchandise at the physical store.

I'm not saying this model works for component suppliers, but rather, original equipment manufacturers like Apple, Google, Microsoft, Samsung, and others that build and sell electronics either through their own retail stores or big box retailers like Best Buy or Wal-Mart. Investments might seem expensive in the short term, but companies will capitalize on long-term gains.

Here are three ways OEMs can lean into the disruption retailers call showrooming:

  • Start with lean manufacturing principals and adopt made-to-order processes requiring little inventory. Streamlining pre- and post-production processes to move raw materials and finished goods can reduce the time from the receipt to shipment. While it lets some companies achieve same-day build and ship delivery times, the concept wouldn't work for rush orders.
  • Implement a just-in-time cross-dock model to direct raw materials to production lines automatically from a replenishment trigger. Also, a direct shipment model that would bypass the distribution center and retail store, sending the items from the manufacturing facility to the consumer. The retailer would still get paid for selling the product from the showroom, but it would never take possession of the finished goods.
  • Work with the retailer to develop a cloud infrastructure to share forecast and materials replenishment data, along with an e-commerce app that allows consumers to take a photo of a barcode next to a product on the shelf in a store. The barcode would facilitate an order for the product and allow the customer to pay for the merchandise. The items would ship to the consumer's home from the OEM's manufacturing facility.

Adapting to reality
Some retailers have begun to embrace the concept of showrooming, which will require OEMs to get on board or miss the boat. Sears recently opened a mattress and appliance store close to my home in Huntington Beach, Calif.

The big retailer moved into a small building that O'Reilly auto parts once occupied, and integrated technology to improve customer service. Consumers can look at the merchandise and purchase items in the physical store, but there's nothing to take home. All orders get delivered. It's a showroom for big-ticket goods.

Sony, which makes laptops, supports a similar model with one exception. The OEM showcases the machines in their local retail stores. Orders are placed in the retail store or online and they ship the machines to consumers from the distribution center, rather than direct from the manufacturing facility.

This model isn't easy to implement. It will take time and rethinking. Some features might not work the first time, but many are already being used by one company or another throughout the supply chain. The impact of mobile devices on electronics manufacturing will continue to challenge the industry. Whether or not companies embrace it will determine their success.

What would you do to build out this model?

28 comments on “Manufacturers Can Learn From Showrooming

  1. Daniel
    June 17, 2013

    “Despite retailers' best efforts to keep consumers buying in stores, 40 percent of Americans have looked up product information while standing in a store, then left to purchase it online”

    Laurie, now a day's most of the brands have their own exclusive showrooms for displaying their products. Customers can walk in through their showroom to know much about the products by its look/feel or application wise. Thereafter they can make the order over online site or by phone. For such orders normally companies may offer a better discount too.

  2. Laurie Sullivan
    June 17, 2013

    Hi Jacob, Thank you for taking the time to post. Can you provide some examples of companies/brands and countries, please? I ask you to name the countries because EBN is read worldwide. Best, Laurie

  3. elctrnx_lyf
    June 17, 2013

    Demand forecast of Apple is critical for many suppliers along the chain. If there is any difference in the projection and actual volumes could cause huge disruption in revenue of the suppliers. This will create jitters to any supplier.

  4. Ashu001
    June 17, 2013

    Laurie,

    Great Post!!!

    Was just wondering about one issue-Will Retailers share Data with Different OEMs?

    Especially if they can later use that data as Leverage(so as to get the best Deal) from Competitors???

    I am not so sure how exactly this model will be implemented.

    Sure in Theory it sounds awesome-Big Data and What not;In Practice it might be  a totally Different Story!!!

    Regards

    Ashish.

  5. Tom Murphy
    June 17, 2013

    Jacob: Not sure if I agree with you about most brands having their own showrooms….  Apple does, and Microsoft has some. That's it. Most phones in the US are sold by carriers or by large retailers, who carry many brands.  And showrooming has been hitting some of those electronics stores the hardest.   So which stories did you have in mind? And in what countries?

  6. Tom Murphy
    June 17, 2013

    Ashish:  These days, a manufacturer works closely with retailers to assure shelf space will be available when a new product arrives at retail. So the data flow between the retailers and the manufacturer is critical.  If  a phone-maker is having trouble getting parts, for example, the phone-maker needs to alert the retailer that there could be delays to assure that the retailer doesn't end up with a empty shelf.  That is how tightly interwoven the electronics supply chain is today.

  7. Laurie Sullivan
    June 17, 2013

    Ashish, Yes, I hope most retailers would share the data with suppliers. Transparency continues to become important in the Internet age. I know some feel uncomfortable with that notion, but trust must play a major role when companies enter into a partnership. I also learned today of a Web site that might make all that information available to anyone who wants to know. And after I gather all the facts, I'll share that information, too. 

  8. Anand
    June 18, 2013

    Demand forecast of Apple is critical for many suppliers along the chain.

    @elctrnx_lyf, I totally agree with you. Forecasting is very crucial for all the supplilers. I am sure suppliers who supply components to the Apple are ready to take this risk becauase they would want to get associated with Apple brand.

  9. Anand
    June 18, 2013

    Laurie, now a day's most of the brands have their own exclusive showrooms for displaying their products.

    @Jacob, I think Samsung is following such strategy. I see lot of exclusive Samsung showrooms in India where they just display Samsung products.

  10. Ashu001
    June 18, 2013

    Laurie,

    Wow!

    A Website which actually gathers all the information in one place and displays it for one and all to see?

    In that case,I have Two Questions-

    1)How does this Website make Money?

    2)At what point do Data suppliers(to the website)-Retailers & OEMs see Value in sharing information freely with that website?

    The way I look at it;its like a Chicken and Egg Sceanario.

    If they don't share the Data with the website;then the website don't get the neccesary viewers and if they Do-Then it can give them a Competitive Disadvantage (to the rest who chose to Hold onto their Data).

    Looking forward to hearing what you find in your Research (regarding this upcoming Website).

    Regards

    Ashish.

  11. Ashu001
    June 18, 2013

    Tom,

    Yes I agree that we do see a basic level of information sharing between Retailers and Manufacturers today.

    But the Vision that Laurie is sharing with us here goes far beyond that .

    I have serious doubts whether all OEMs will be onboard with this Vision(especially when large sections of their Data can and are a very effective Competitive Differentiator).

    Regards

    Ashish.

  12. Laurie Sullivan
    June 18, 2013

    Thank you anandvy: it has not caught on in the U.S. 

  13. Laurie Sullivan
    June 18, 2013

    Ashish,

    To answer your questions:

    1) How does this Website make money?: Online advertising and cross-selling products.

    2) At what point do data suppliers (to the website) – retailers and oms – see value in sharing information freely with that website?: when they realize it's not the data that diffferentiates them, but their strategy and lean supply chain. Data can be found or bought through third-party companies. APIs make that possible.  

    I respect your point of view, but I write daily about online advertising, marketing, innovative technologies and business strategies. Brands like Apple and Samsung now realize it's not the data that diffferentiates their products and services, but their business strategies, which includes marketing and advertising that drive forecasts Jennifer talked about in another post. As more information moves online it becomes available to all. Data has become a commodity, (at least in online advertising), so it's what the company does with the data that makes the difference. 

    The company's competitive advantage should point back to their excellent product and customer service. It's just a different way of thinking about data.

    Best,

    Laurie

  14. FLYINGSCOT
    June 18, 2013

    If you can see and touch a product in the flesh then buy it at internet prices then that is the way to go.  Retailers will need to make up onvolume what the lose on the overhead of the showroom.

  15. Tom Murphy
    June 18, 2013

    Flying Scot:  I disagree.  The scenario you describe certainly has been causing a lot of problems for brick and mortar retailers for years. But times are changing.  Leading retailers like Walgreens, Best Buy, Sears and others are coming up with very clever ways to add value to the in-store experience, including:

    –immediate gratification:  why wait? Get your product now at the same price and take it home.

    –free shipping: buy it today and we'll deliver it to your door for free tomorrow.

    –more choice: If you don't like what we have on the shelf, see what else we have. We'll sell you any of it with a price-match guarantee

    –easy return: Why pay to repack and return a product?  Just bring it back to the store and we'll exchange it for a different model or return your money.

    With choices like that, a lot of customers are now doing their research online, then going to the store to cut their best deals. And the retailers are retaking lost ground.

  16. Ashu001
    June 18, 2013

    FLYINGSCOT,

    Lets look at it a little differently.

    Why can't we have Internet Prices in Store today?

    What's stopping us From Delivering the same prices in-store?

    Especially now with us getting very close to a Universal Sales Tax for Online Sales(atleast in America);I see no reason why Offline can't compete with Online today.

    Lets also not forget that most Retailers are now adding Delivery charges to the Online Purchases made and things change very-very quickly!!!

    Remember the Best Buy model?

    I have a feeling that might catch on really fast.

  17. Ashu001
    June 18, 2013

    Tom,

    My Thoughts Precisely!

    I was thinking on exactly the same lines today!

    Retailers have had time and have adapted to the Online Sales Onslaught effectively enough today.

    Brilliant,Brilliant Post!!!

    Regards

    Ashish.

  18. prabhakar_deosthali
    June 19, 2013

    In my opinion the on line stores and the brick-and morter stores go hand in hand in today's consumer world. For some consumers it is the on line showroom for doing the product survey and making the actual buy ,by walking into a brick and morter store. For some consumers it will be the other way round. All in all both models of retail sales have to co-exist and depending upon the product the preference of actual buying will shift from one model to another. For standard products such as say stationary, grocery, toilet supplies and such things the preference will go to on line buying helped by the TV advertising. Whereas when it is clothes, furnishings and such things the preference goes to the actually walking into a store getting the touch and feel of the product before buying it.

    In the context of elelctronic items – for items such a a television set the preference will go to getting the physical feel of the product whereas for a product like a iron, toaster or grill, on line buying could be the choice.

  19. Daniel
    June 19, 2013

    “I think Samsung is following such strategy. I see lot of exclusive Samsung showrooms in India where they just display Samsung products”

    Anandvy, apart from that Nokia has Nokia priority show room; LG, Panasonic, Sony and Toshiba have their own exclusive show rooms. I think all most all companies have their own showrooms apart from their presence in multi brand retail chain shopping centers.

  20. Daniel
    June 19, 2013

    “Not sure if I agree with you about most brands having their own showrooms….  Apple does, and Microsoft has some. That's it. Most phones in the US are sold by carriers or by large retailers, who carry many brands.'

    Tom, you may be true with US markets. But in most of the Asian countries, such tie- ups are very limited for GSM/3G services. Customers can buy any handset from open market or retail shop for inserting the SIM cards. But for CDMA service  there are such limitations.

  21. Daniel
    June 19, 2013

    “Can you provide some examples of companies/brands and countries, please? I ask you to name the countries because EBN is read worldwide. Best, Laurie'

    Laurie, in India we have exclusive show rooms for Samsung, Nokia (Nokia Priority), LG, Toshiba, Dell center, Lenovo, Sony etc

  22. Laurie Sullivan
    June 19, 2013

    Yes, Jacob. I wish we had show rooms (similar to India) in the U.S. I feel in so many ways that require alternative thinking the U.S. remains behind other countries.

  23. Tom Murphy
    June 20, 2013

    Thanks Jacob.  I love that EBN is a global site and that we can get answers to questions like that right away. Now I wonder why each brand has its own stores in India!?   I suspect it is because in the US, the phones are sold along with service plans. So the carrier selling the service plan sells many different phones — they are agnostic as to which brand you buy.   The key for the phone makers is that they must get featured by a carrier to make it big, so they put their marketing dollars into that instead of opening stores.

  24. Daniel
    June 24, 2013

    “I wish we had show rooms (similar to India) in the U.S. I feel in so many ways that require alternative thinking the U.S. remains behind other countries”

    Laurie, it's very fascinating to know that “US remains behind other countries” in establishing retail or branded show rooms. How come it happens?

  25. Daniel
    June 24, 2013

    “Now I wonder why each brand has its own stores in India!?   I suspect it is because in the US, the phones are sold along with service plans.'

    Tom, in India such service provider tie ups are very limited. So companies used to open their own brand shops for promoting their products and direct interacting with customers. Moreover new products are first displaying through such brand shops and any offer can pass direct to customers.

  26. Daniel
    August 11, 2014

    “It was great to see the old printshop and everyone who works there again. I am excited to see a printing business still operating and growing, great job guys 20 cloud backup services

    Jackdon, how this is relevant here?

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    October 7, 2014

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