Showrooms vs retail

Yesterday, we were driving past a big Toys’R’Us sign. My partner remarked it’s interesting that these signs are still up and she was wondering what is going to happen to these retail locations. They’re gigantic locations and not easy to fill. As far as I know, the only stores who are increasing their retail locations are dollar stores. Everybody else is shrinking.

My parents live in a small village and half of their retail locations are empty with “for rent” signs on them. Some of them have been sitting there for years and there’s no real end sight.

I do believe there’s a need for retail, but as Ben Evans remarked in his presentation I posted the other day, it’s going to be part of the CAC and coming out of the marketing budget. It’s in this light you’ve to see the Amazon 4-star store. This store does not exist to make money.

I expect retail ultimately is going to morph into two directions:

1. Grab-and-go stores for your immediate needs on the go
2. Showrooms

The first one is pretty obvious and already exists today. It even includes the vending machines of Best Buy you see at the airport. It’s nice you can grab a pair of headphones before you’re heading into an 8-hour flight in case you forgot to bring them.

The second one is less obvious. When I think about retail in the future, it’s more about experience and discovery without the goal of making the sale. Retailers – and especially niche retailers – have been complaining about “showrooming” since the advent of online retail. You go to a store and check out the product, but you ultimately buy online – most of the time because it’s cheaper.

From a product brand perspective, it doesn’t really matter where a customer makes the sale, but it certainly matters to the retailer today. The need to play, try out or discover isn’t going away. For this, I expect that retailers will morph into showrooms where they get paid for putting a product on display and they don’t rely on sales anymore. This can also solve the problem of empty stores without knowledgeable staff to tell you about a product.

Apple does this in their own stores even though they do significant revenue in each store as well. But it is mostly an extension of their company and their brand. There is ample staff available to help you and advise you on making a purchase decision. Apple can pull this off because of their sheer size and this isn’t an option for most companies.

I would not be surprised if several showroom retail companies will pop up over the coming years to just that – showcase products and give purchase advice. Shopping will become “showrooming” by default and you buy online at your favorite place. This may even give the Toys-R-Us locations a new life.