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From Home Furnishing Business

Editors Letter: The New Face of Service

by Bob George,

The focus of this issue is the up-andcoming stars of the industry who will define the strategy for the coming decade. The long-term success of the industry will be determined by securing and retaining this talent. But beyond the leaders is the workforce that executes under their direction — and that is the problem.

Furniture stores, along with the entire retail trade, are struggling to attract and retain employees. In April of last year, during the forced shutdown across the nation, furniture stores lost 38% of their employees. While many employees returned the following month, the industry has not returned to 2019 levels (97%). The graphic below represents the statistics.

These employee levels would be fine if it wasn’t for the fact that the industry grew 29.8% in Q1/2021 over the same quarter last year. Anecdotes abound about the lack of the delivery crews to deliver the product that finally arrived or the need to hire quality sales associates. These two components of the process — selling and delivering — are essential to a retailer’s success. Although employee search sites may produce applicants, the resulting interviewees who show up are the problem.

Obviously, a solution is increasing the hourly rate or guarantees for retail sales associates. In desperation, many retailers have gone this route. However, once an increase is done it can’t be recalled. A key performance indicator for retailers that has not been considered recently is wages as a percent of delivered sales. For every percentage point increase, it must be recouped with an increase in gross margin. It sounds simple, but with the jump in gross margin due to rising transportation cost, will the consumer accept the price increases?

Wages, as a percentage of sales delivered, range between 14.5% and 21.5%, dependent upon the retailer’s price point and the retail experience delivered. The graphic below presents the industry functional breakdown for the initial quarter of 2021 compared to same quarter last year. When comparing Q1/2021 to the same quarter last year (Q1/2020), the average retailer expenditure has been reduced by 2%, primarily due to higher volume (10.7%). As we move to the new normal, the traditional ratios will be hard to compare. But gradually, a new business model will emerge. And increased wages will be part of the new normal.

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