The Showrooming of Georgetown

Photo by Vpickering.

Georgetown has lots of chain stores (although not quite as many as some think). These companies are willing to pay top dollar to open their store in a neighborhood with Georgetown’s cachet. This in turn drives up the rental costs for everyone, which makes it all that much tougher for non-chain stores to compete.

You’d expect that these stores are getting a big return on their investment here in Georgetown via sales. But you may be wrong. GM has heard that increasingly the business model for stores in expensive neighborhoods like Georgetown is shifting from the traditional retail model to a new one based around the concept of “showrooming”.

Showrooming is generally used to describe the increasingly common occurrence whereby a customer comes into a store, reviews the merchandise, and then goes back home and buys it cheaper from somewhere online. Companies like Best Buy view this (probably rightly) as a mortal threat. A Sony TV bought from a retail Best Buy is identical to one bought from Overstock.com. Once you’ve seen the product in person, unless you’ve got a Super Bowl party later that night, it probably makes sense to look for a better deal online.

But that dynamic is less at play when talking about high end fashion. You can walk into a Brooks Brothers, decide on a shirt, and then go home and look for it online. But the only place you’re going to find it is at Brooksbrothers.com. And the price will be the same.

And from what GM hears from those in retail, more and more stores like Brooks Brothers don’t care if you leave and buy the shirt online. While the store clerks and managers sure want you to buy the shirt from the store (due to commissions), the company itself doesn’t care that much where you buy it. And for that reason, they might be willing to pay more than they would otherwise in order to have a store in Georgetown.

Brad Tuttle of Time Magazine recently wrote about this dynamic:

[A study on "showrooming" found that] nearly 3 in 10 shoppers (29%) said that they used a physical store as a showroom and ended up buying the item not from a competitor but from the physical store’s own website.

This is a different sort of showrooming, one that store managers and sales staff who work on commissions might not like, but one that is here to stay—and from the retailer’s point of view, a situation that’s far preferably to losing the sale to a competitor. What’s curious is that, even as shoppers view purchasing at a brick-and-mortar store as the same as buying from the store’s website—the money goes to the same place, right?—in some some ways stores can view their own websites more or less as competition. “They have separate teams and business units for each with different approaches, offers and information and even prices,” the Vibes report states.

Such distinctions are foolish and outdated, according to Vibes researchers, resulting in confused shoppers and possibly hurting sales. It makes far more sense if the online and in-store teams are truly on the same team, sharing similar goals and offering a seamless sales experience no matter how the consumer wants the transaction to happen.

So from the company’s perspective, a store in Georgetown doesn’t have to necessarily justify its rent through register sales. So long as feet are coming through the door, the hands are picking up and feeling the product, and the mind is making a connection with the product and to the cachet of shopping in places like Georgetown, whether the product goes out the door is less of a concern.

This poses an obvious problem for non-chains. They do need the product to go out the door; they have no other channel. It’s hard enough when their rents are driven up by deep-pocketed chains, but it’s even harder when those chains basically view the entire store as one large loss leader.

Is this trend going to increase ever more for Georgetown? Interestingly, a new store that just opened up in Georgetown literally bases its retail business model on showrooming. The store is Bonobos, which sells men’s clothing. Since its founding a few years ago, the company has been a strictly Internet-based company. However, they have bowed somewhat to the demand that customers try on clothes before buying them online . They’ve opened a handful of “Guideshops” which look and feel just a like a normal small clothing shop, but from which its impossible to walk out with any actual products. You set an appointment and come in and try on whatever you like. But any products you buy have to be delivered to you.

GM got a preview of the concept last weekend at the new Guideshop in Cady’s Alley. He’ll admit it’s nice to receive personal service from a employee whose not in a rush or hustling for commissions. (Full disclosure: after the preview, the store gave GM a complimentary pair of pants. That’s very nice of them, but GM donated the pair he received to charity.) And now he knows what size he wears (which turns out to be the exact size he thought he wore) if he decides to buy any of the store’s clothes online.

So in a lot of ways, a store like Bonobos is embracing the new model; they just came at it from the other end of the spectrum. Customer service and brand/status awareness will continue to be important to the retail business model in neighborhoods like Georgetown. But what that means is that we as residents will become more and more surrounded by bricks and mortar stores that are more billboard than retail.

That’s fine if you want more chain clothing stores. In fact it’s great for you because a store that might not otherwise bother with Georgetown might open despite the high rent and lower sales.

But it’s a problem if you’re interested in something else. Even restaurants are falling victim. Papa Razzi is being replaced by Frye Shoe Company and Unos is being replaced by a Billy Reid. Turnover happens, but when chain restaurants get replaced by high end chain clothing stores, that signals a change.

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3 Comments

Filed under Retail

3 responses to “The Showrooming of Georgetown

  1. Brad Altman

    Another reason that chain retailers would rather that you buy online is because many store leases require that payment of a percentage of gross sales to landlord as additional rent. So no commisiion to employee and no additional rent.

  2. Pingback: Georgetown Cupcakes has a big tax bill

  3. Tyler

    From personal employment experience, I just want to point out that a lot of the big high-end chains do not actually have commission models for in-store salespeople. Retail stores also typically discount more in-store than online (to avoid the expense of returning inventory to central warehouses across the country) and know that the cost of shipping makes people reticent to go home and buy the same thing online. They certainly do want you to buy, though, and they know that “I’ll order it online” is code for “I want to get out of here.”

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