The sheen is off the catalogue-showroom business. Once the star of discount retailing, these stores now face increasingly stiff competition -- not only from other discounters but from the traditionally higher-priced department stores as well.

Together, these competitors and their heavy promotional campaigns are casting a dark shadow on the 30-year-old catalogue-showroom industry, dampening its sales and, even more distressingly, dimming its profits.

The toll is the most pronounced on the largest, publicly held chains, including two of the major Washington-area chains, Best Products Co. Inc. of Richmond and W. Bell & Co. of Rockville.

This year, Best reported the lowest profits in 11 years -- even though its sales were 10 times higher than those rung up in 1975. And for the first time since its early years, Best plans to open no new stores this year, scrapping among other things plans to enter the New York metropolitan market.

For Bell, profits dropped to a three-year low last year. Even more significant, although Bell has added two new stores to its chain this year, sales for the current fiscal year that ends next month are down sharply, making it likely that this year's profits will be even lower than last year's.

Meanwhile, the industry's largest chain, Service Merchandise, has just announced its biggest loss in its history, losing $29 million for the first three months of this year -- more than seven times the loss reported for the same period a year earlier.

"The catalogue-showroom industry is in trouble," said Kenneth M. Gassman Jr., a financial analyst with Wheat, First Securities, which is based in Richmond. "When the catalogue industry started 25 years ago, it offered one thing, and one thing only: the lowest prices on nationally advertised, brand-name hard goods. It didn't provide ambience. It didn't provide service.

"Today, you can get the same low price on nationally advertised, brand-name hard goods at Zayre's, K mart and Bradlees," Gassman said. "And at these stores, you can get a higher level of service and a better shopping experience. You no longer have to go to the catalogue showroom to get the lowest price."

When the price advantage was substantial, "people were willing to make the trip to a showroom, which was smaller and not as conveniently located as a department store," noted Paul Koenigsberg, vice president of retail strategies for the management consulting firm of Management Horizons, a division of Price Waterhouse.

With the low price, "people were very willing to put up with the showroom delivery system that was very time-consuming. Now that the prices and assortment are not really different from their competitors, showrooms have a more difficult time convincing customers to shop at showrooms and go through this lengthy process," Koenigsberg added.

As a result, the catalogue-showroom industry's market share appears to be shrinking rapidly, retailing experts say. In 1984, the industry posted sales of $9 billion. This year, sales are expected to be about $7 billion, Gassman predicted.

Along with shrinking market share comes consolidation of the industry, with a number of businesses closing their doors or selling out to larger concerns. One of the largest chains, Consumers Distributing, is selling off its West Coast division and also may be interested in spinning off its East Coast division as well, Gassman says.

Meanwhile, for the showroom companies that remain and are profitable, some are doing their utmost to hide the fact that they are part of the industry. Brendle's Style Different

Retailing experts point to Brendle's Inc., a North Carolina chain that recently sold stock to the public for the first time. In its prospectus to investors, the words "catalogue showroom" are conspicuously absent. Instead, Brendle's repeatedly calls itself a chain of "31 discount retail stores."

But retailing officials are not ready to write off catalogue showrooms. Even though its market share is decreasing, it still is capturing $7 billion in sales a year, Koenigsberg said.

"There's clearly a future," he said. "There is an awful lot of business out there, and they are very important to a lot of vendors," he noted. However, he added, to survive, "they may have to revive their competitive offering and look for services other than pure price."

That is precisely what a number of companies are doing. Best, having seen its profits decline from a high of $33 million in 1984 to $2.2 million last year (while its sales climbed by 7 percent to $2.2 billion), now is in the midst of a $100 million campaign to remodel about half of its 213 showrooms across the country.

By expanding its merchandise and redoing its stores with bright, modern furnishings, carpet and white tile, Best hopes not only to lure more customers to its stores but also to entice its shoppers to buy more than they might have planned.

As part of the remodeling, Best is trying to improve its time-consuming purchasing process. Previously, Best customers had to stand in line three times before they completed their purchases: first, to order the item, then to pay for it and finally to collect it. Now, in the remodeled showrooms, many of the items are already on the shelves so customers can serve themselves. If not, then the processing time is reduced, so that after ordering a product, the consumer has to stand in line only once, paying for it and receiving it at the same time.

According to Best, the 22 stores that have been remodeled to date already are seeing better sales results -- with sales running about an average 6 percent better than nonremodeled stores. Gross margins also have risen about 1.24 percent above those of nonremodeled stores. Self-Service Emphasized

Self-service is increasingly the direction in which many catalogue showrooms are going. Although they still offer the inch-thick, glossy catalogue to customers annually, many, including Brendle's and the local Evans Distributors & Jewelers, have virtually abandoned the catalogue-ordering process for all but jewelry and electronics. Additionally, many of the items featured in the showrooms are not included in the catalogue.

The self-service approach was adopted by Evans nearly 15 years ago, said company president Steven Baumgarten. According to Baumgarten, that decision has helped make the company healthier than its counterparts. Its sales have more than doubled in four years, he says, noting that in 1983 sales were $22 million. For its latest fiscal year, sales were $40 million, and for this year, he predicts the company will sell $45 million worth of goods.

Baumgarten said his profits also have doubled, although he declined to release exact figures, noting that the company is a private, family-held concern.

Bell continues to shy away from self-service. However, having seen its profits drop to $1.5 million from 1983's high of $2.7 million (while its sales climbed 18 percent to $148 million), this chain is also undergoing some major changes. Chief among these is a redesign of its 426-page catalogue.

"Last year, we were severely impacted by the realization that our 12-month catalogue didn't have the pulling power it used to have," said Senior Vice President Fredric J. Bell.

"People's buying habits are changing," Bell said. "They used to refer to the catalogue all year long; it was our basic selling tool. But now they use the catalogue as a basic reference tool. When what they want is seasonal -- such as barbecue grills or fireplace equipment -- they now look at the ads in the newspaper to see what's on sale. If we're not putting the message out too, people will go elsewhere."

As a result, he said, the company is changing, no longer relying primarily on the catalogue, but instead turning to "more frequent, seasonally oriented promotions." The catalogue will be reduced by 25 percent, with the seasonal goods excluded. These will be promoted in the mail or newspaper advertisements closer to the time of need. Lines of Goods Trimmed

Additionally, some of Bell's merchandise lines will be reduced. For example, the five fancy wood barometers the company now carries -- in different sizes and woods -- will be reduced to three. "You don't need that many," Bell said.

In addition to revamping the showrooms and catalogues, some chains, such as Best and Service Merchandise, also are diversifying into other businesses. Best, for instance, has Ashby's, a discount women's apparel chain, and 11 Best Jewelry stores. Service Merchandise has entered the do-it-yourself warehouse business, with its Mr. HOW Warehouses. Both have dabbled with the computer-retailing business, although Best sold its chain two years ago.

Industry analysts say that these diversification moves and aggressive acquisitions made in 1984 and 1985 have eaten major chunks into the company's profits. Similarly, Bell's entrance into the economically troubled Houston market has hurt the company.

Given Bell's troubles, investors frequently predict that Bell is a takeover candidate -- a rumor the company strongly denies. "We're not planning any mergers. We haven't any plans to merge with any catalogue merchant or anyone else," Bell said.

Despite their current troubles, industry experts predict that catalogue showrooms will remain a part of the retailing scene for some time to come.

However, notes Gassman, as they increasingly adapt to the public's current shopping habits and become more self-service oriented and less reliant on the catalogues, "they may lose their identity as catalogue showrooms and become known merely as a discount specialty retailer."