What Drives Showroom Growth?

We all know the impact ecommerce has had, and will continue to have, on brick-and-mortar retailing. The consensus of ecommerce leaders such as Amazon and brick-and-mortar stalwarts such as Nordstrom and Best Buy is that retail is not an "either or" proposition.  Why else would Amazon purchase Wholefoods and open brick-and-mortar grocery stores and book stores?

 

Retail research and metrics firm Custoria recently surveyed more than 100 of its retail customers, 500 million end user customers and $150 billion of retail transactions.  The survey looked at the following key performance indicators:

• Customer acquisition
• Average order value
• Order frequency
• Retention rate
• Reactivation rate

Custoria found that revenue increased on average 17. 2 percent.  The retailers surveyed were most successful at increasing their number of new customers and least successful at selling to lost customers.  Custoria discovered that order frequency was the most efficient driver of growth.  For every one percent increase in order frequency, there is a corresponding 2.8 point increase in revenue.  Existing customers that repeatedly order is the key performance metric that yields the biggest bang.  

 

Retaining existing customers and luring customers who had left the nest had no effect on revenue growth. This means offering discounts is not enough to move the needle to attract prior customers.  Instead, retailers need to promote their value propositions with former customers and rebuild relationships.

 

Lessons for decorative plumbing and hardware showrooms - your repeat customers are your best source of sustained revenue.  Focus your marketing efforts on this clientele, because we have all learned it is easier to sell an existing customer than trying to acquire a new customer.