From Home Furnishing Business
Across Distribution Channels
As expected, in major distribution channels that market furniture and home furnishings, retail management occupations carry the higher salary positions. Within management occupations, electronic shopping and mail-order houses pay the highest wages – both sales managers and purchasing managers -- earning a median annual salary above $115,000 (Table A). In general, purchasing managers earn the most among the management occupations – all above $100K, regardless of the distribution channel. Among administrative services managers, home furnishings stores paid the greatest median annual wage of $112,570. Furniture stores were near the bottom at $77,240.
Non-managerial occupations have been divided into two charts for clarity – Table B (Part 1) and Table B (Part 2). As a whole non-managerial positions among furniture and home furnishings retailers carry much lower wages than managerial positions. As shown in Table B (Part 1), by far both business and financial operations and computer and analytical jobs have the highest earnings in the non-managerial category – all earning over a $26 median hourly wage with the exception of building material and supplies dealers paying computer and analytical positions $19.42 an hour. Furniture Stores and Home Furnishings Stores are near the bottom at hourly wages of $27.24 and $26.92 respectively for business and financial operations occupations, compared to $29.54 for the top paying pure e-commerce companies. In computer occupations, Furniture Stores at $31.68 an hour are near the top, only exceeded again by pure e-commerce retailers at $40.76.
Shown in Table B (Part 2) are non-managerial occupations -- design, sales, office and administrative, and various warehouse and delivery positions. General merchandise stores is the lowest paying channel for non-managerial occupations, while electronic shopping and mail-order houses are the highest. Sales, office, and transportation occupations earn the lowest in non-managerial jobs – many below $15 an hour. Design/arts/media positions in furniture stores are the second highest earnings among the select distribution channels at $19.09 per hour, second to pure e-commerce and mail order retailers at $24.26. In sales and related occupations, furniture stores pay a median of $14.49 per hour while home furnishings stores are lower at $12.07. Interestingly, qualified installation, maintenance and repair occupations are among the highest paid non-managerial occupations across all of the selected distribution channels, with furniture stores averaging $17.83 per hour and home furnishings stores $18.59. As a group, transportation and material moving occupations are the lowest paying positions.
Number of Employees
With the exception of electronic shopping and mail-order houses, all the major furniture and home furnishings distribution channels have cut the number of employees since 2006 (Table C). The greatest loss occurred between 2006 and 2012 when furniture stores reduced employees by (-25.2) percent and home furnishings stores by (-11.9) percent. Since then, the distribution channels (except for electronics and appliance stores) have hired employees to fill the stores that survived the recession but amounts are still shy of pre-recession levels. Last year, the furniture industry employment totaled 224,390 and home furnishings store another 255,910.
Furniture and Home Furnishings Stores:
Drilling down from the broad management occupation categories into more detail for furniture stores and home furnishing stores, with the exception of administrative service managers, wages in furniture stores are generally higher. In 2018, administrative service managers in home furnishings stores were the highest paid management positions, earning a median annual wage of $112,570 compared to the same occupation earning $77,240 in furniture stores (Table D). This represents a 42.4 percent increase from 2012 to 2018 for home furnishings stores administrative service managers compared to a 21.4 percent increase in furniture stores (Figure 2). In furniture stores, financial managers are the highest paid management positions averaging $114,600 annually. Purchasing managers are the second highest management position in furniture stores at $107,180, similar to wages of $107,400 in home furnishings stores. Purchasing managers earnings increased 2012 to 2018 by 45.3 percent and 20.6 percent, respectively (Figure 1).
On average, neither general managers, sales managers nor transportation, storage, and distribution managers have broken the $100,000 ceiling. In addition, the earning of GMs in furniture stores and home furnishings stores have had the lowest increase of all management positions over the last five years, growing only 1.6 percent and 0.9 percent respectively 2012 to 2018. GMs in furniture stores earned over $5,000 more annually than those in home furnishings stores – sales managers more than $13,000 and $15,000 for transportation and distribution managers (Table D and Figure 1).
Art and Design Occupations
Non-management wages are reported in hourly wages. Interior designers in furniture stores have shown consistent median hourly wage growth (14.1 percent) from 2012 to 2018, compared to the much slower growth pace in home furnishings from 2012 to 2018 of 3.9 percent. (Table E and Figure 2). In 2018, Interior designers earned a higher median hourly wage in furniture stores ($21.90) than in home furnishings stores ($19.75).
Median hourly wages of merchandise displayer and window treatment occupations are consistent between both channels – earning between $15 and $16 an hour in 2018 (Table E).
Sales and Related Occupations
As shown in Table F, sales and related occupations are among the lowest paying jobs in furniture stores and home furnishings stores. These have also been the slowest in earnings growth. In both distribution channels, cashiers earn a median hourly rate below $12. Wages continually dropped for cashiers through 2012 to 2015 (Figure 3), before growing in recent years – most likely due to minimum wages going up in many cities and states. Retail salespersons make more in furniture stores with a median hourly wage of $13.94, compared to $12.40 in home furnishings stores. The most startling statistic is that between 2012 and 2018, earning for retail salespersons in furniture stores grew only 6.5 percent and 5.9 percent in home furnishings stores (Figure 3).
Office and Administrative Support Occupations
By far, executive secretaries and executive administrative assistants are the highest paid among office and admin support jobs – earning a median hourly rate of $29.20 in furniture stores and $26.68 in home furnishings stores (Table G and Figure 4). The executive admin jobs also had the largest increases from 2012 to 2018 – jumping 32.5 percent in furniture stores and 29.8 percent in home furnishings stores.
Lowest paid among these positions are customer service reps, receptionists and information clerks, and stock clerks and order fillers – all earning less than a $14 median hourly wage.
Transportation and Delivery
Among transportation and delivery occupations in furniture and home furnishings stores, installation, maintenance, and repair workers are among the highest paid non-managerial positions, earning a median hourly wage of $17.83 in furniture stores and $18.59 in home furnishings stores (Table H). Although light truck or delivery services and drivers earn considerably less at $13.10 and $15.47 respectively, their wages have increased by 17.5 percent and 21 percent since 2012.
No doubt furniture and home furnishings stores are feeling the pinch of increasing wages. With salaries going up nationwide, furniture and home furnishings retailers should be focusing on where to place their bucks so they can get the most bang in terms of competent employees that will add to the bottom line.
“The updated styling of our Costner Luxury Motion sofa demonstrates that motion furniture can be as fashionable as stationary furniture,” said Cheryl Sigmon, director of merchandising at Bradington-Young. “Luxury Motion has grown to be a significant portion of our overall business and our attention to detail on the perfect ‘style and comfort’ balance is what makes Bradington-Young a key player in this product category.”
Other manufacturers are honing in on offering premium quality with a made in the USA guarantee, like Jackson Catnapper. Says Anthony A. Teague, senior vice president of sales and merchandising, “Offering our customers a domestic alternative in the leather motion category with “American scale” and an Italian Leather story has been a great formula for success for Catnapper. We have a dozen top grain leather frames with sofas ranging from the ‘import-busting’ $999 retail to the more feature-laden at $1,499 retail. When compared to much smaller-sized import products and cheap Chinese leathers, our leather motion category simply out-performs others on retail floors. Couple that with the ability to offer our customers an alternative to the pain of flowing containers, and it’s easy to understand why this category is booming for us.”
As manufacturers continue to integrate motion and technology in more product designs, retailers want to know what consumers expect for their future motion category purchases to optimize their product assortment on the sales floor. Based on a FurnitureCore, Inc. industry model developed by Impact Consulting Services, parent company to Home Furnishings Business, when asked to rank their top four feature preferences in reclining furniture products, the clear leader of feature options at 55% was ‘automated adjustable headrest and lumbar support’. For a tie in second at 45% were ‘heat and massage’ and ‘docking station for a mobile device’ features. Closely behind at 35% was a ‘storage drawer’ and ‘hidden tabletop’ at 32.5%. Other comfort and convenience features rated are shown in the graph below.
More important, the same study polled consumers on their satisfaction rate of their most recent reclining furniture on a scale of 1-7. With all the added features to the category, it was no surprise that 87.5% of consumers rated their satisfaction with a 5+ rating (average response 5.58%). It is worth noting that the same survey polled consumers on their most recent upholstery purchases. Only 35.29% of consumers reported that the retail sales associate made them aware of reclining and power options available in upholstered products! This leaves a chance to increase average ticket behind as the same study indicated that 15% of consumers are willing to pay upwards of $200 more for power recliners. The motion products tell their own stories and practically sell themselves as long as the consumer is aware of the expanded options and customization that manufactures offer their retail partners.
This category will continue to evolve with new, exciting features to keep up with consumer expectations by incorporating comfort features and technology without surrendering style for many years to come.
Alex Bernhardt, Sr., the company’s chairman, acknowledges that Lenoir and Caldwell County have had a difficult transition over the last 20 years, but they have emerged strong because the overall economy is much more diverse. Furniture remains a vital part of the region’s economy.
Bernhardt is now the largest furniture manufacturing employer in Caldwell County, with about 1,500 people. That operation comprises about half of the company’s total output, with the other half coming via imports.
Bernhardt, a member of the third generation of the Bernhardt family to lead the venerable company, is also the company’s self-described chief cheerleader. He is an occasional advisor and “top admiration giver” for the next generation, which includes his son, Alex Bernhardt, Jr. and his two nephews, Rountree and William Collett.
“I try to give advice only when requested, but I am still active in an advisory role on a fulltime basis with the company,” Bernhardt says.
Bernhardt sees his company as committed to its employees and to Caldwell County. He is proud of the fact that the company has no debt and operates globally with its brand while still keeping its community focus and commitment.
“Our headquarters is still in Lenoir and that helps in many ways because over the last two decades many of the managers of other industries, particularly furniture, have left Lenoir through buyouts, sellouts and mergers,” he says. “I am proud that we have survived and have touched as many lives as we have. But I don’t enjoy the fact that many of our other local good, strong, friendly competitors have exited Lenoir, because over the past 100 years, furniture has been important in our community.”
Bernhardt recently spoke with Home Furnishings Business to discuss his company’s current direction and how it has navigated the furniture industry’s constant change.
Home Furnishings Business: At a consumer level, brand recognition for furniture manufacturers has deteriorated over the last 20 years. Is consumer branding a viable strategy for Bernhardt?
Alex Bernhardt, Sr.: Consumer branding is very important to us and is something to which we are totally committed. We started this in 1982, so it has been 37 years that we have been advertising our brand. This year, with our national advertising, we targeted 140 million consumer impressions, which is No. 1 in shelter magazine spending in our competitive set. In addition, the internet has become so important and we are very active on the web. Our website has more than 7,000 visits a day, which I find pretty astounding. Also, we have almost 100,000 consumers who have opted into our database to receive updates. The more recent thing is social media. We are active on Facebook and Pinterest, but Instagram comes to mind. We have almost 140,000 followers, which I believe makes us one of the leading furniture brands. We are trying to have a consistent brand image across all of our platforms with photography, advertising, our internet presence and all of our graphics, including our trucks. We still believe in brands and we’re still committed to investing in it.
HFB: What is Bernhardt’s strategy to fill the void caused by the decline in numbers of independent furniture retailers?
Bernhardt: There has been some decline. I would say it has been more about change than it has been about decline. Some of the fine, old retail names that I grew up with when I started 50 years ago have disappeared, but others have emerged. A number of the good retailers we do business with have more stores and more floor space. Companies such as Baers, Robb & Stucky and Mathis Brothers have all seen internal expansion that has helped us.
Another major recent change is the demise of the store programs at Thomasville, Drexel and Henredon. Many of the owners of those operations have added Bernhardt to replace some or all of those previous high end suppliers. We are aware of the change and we are aware there is some decline, but we don’t see a precipitous loss of upper-end ability to present our products.
All of that notwithstanding, the biggest change for us in the last decade has been the addition of the design trade. By actively courting both the retail store and the local design trade, we have seen steady growth. An example of that would be our attendance at the High Point semi-annual furniture markets. We have approximately twice as many people coming through our showroom as we did a decade ago. The landscape is changing for sure and we are looking for, and finding, different channels to fill the void when we lost a higher-end retailer.
Another example of how we have found growth outside of traditional furniture stores is exports. While exports are not a major part of our business, it is an important and growing part. Ironically, our largest export country is China, which has just imposed tariffs on the products we ship to China, resulting in a decline in demand for our products there. We are feeling the effect of the tariffs, both on incoming parts, which we import from China, and also on our ability to export. We have also done private label manufacturing for specialty retailers for many years and will continue to do that quietly in the background.
HFB: What is Bernhardt’s e-tailing strategy?
Bernhardt: We are currently selling some limited parts of our line through e-tailers such as Wayfair and will continue to look at those opportunities while trying to create a level playing field for our traditional furniture retailers. One way in which we attempt to do that is by establishing minimum advertised pricing to give each outlet an opportunity for a reasonable profit margin. We do see continued growth in internet selling. It’s an inexorable tide that neither we, or anyone else is going to stop, so it’s best to find ways to participate constructively.
HFB: Bernhardt recently committed to entering the outdoor products category. Will this become an important category for Bernhardt?
Bernhardt: A number of our retail customers and friends have encouraged us for a while to enter the outdoor area and to bring our design leadership to that segment of the market. While there is no shortage of commodity products for outdoor, there is some shortage of fashion products with design and function becoming important. We see the growth not only of true outdoor, but also patios, enclosed glass porches, and other areas where the outdoor and indoor environment is blending together. So, we have been asked to take our indoor designs and replicate them for the outdoors. We will be launching our offerings this fall. We are excited about it and we do see it as an opportunity. Part of that will be manufactured in Lenoir and part
of that will be imported.
HFB: Bernhardt has always embraced design as a strategic strength. While achieving success in the commercial segment, the residential segment has been more of a challenge. Why does the consumer resist?
Bernhardt: We think with the consumer we target, which is an upper end consumer, fashion continues to be very important. They manifest that in the clothing they buy, the automobiles they buy, shoes and watches. They are very driven by brand and fashion. So, the emphasis on fashion may not be consistent across all levels of American consumer buying and all price levels of American furniture, but we believe in the niche that we target it is extremely important. That’s why our overall strategy is to be a leader in design backed up by a good brand.
Having spent almost fifty years trying to understand trends and how they will impact the Home Furnishing Industry, I have watched many changes that have impacted the industry, both positive and negative. This will not be a nostalgic trip down memory lane with commentary on the good old days however it will be a cautious commentary on the speed of change.
We are in a “disruptor” economy, whatever that means. But that has always been true in business. Entrepreneurs seize upon a concept and push forward to satisfy the perceived needs of the consumer. The industry has experienced “category killers,” blockbuster retailers that through volume reduced prices along with services, captured significant market share. The remnant of these retailers, such as Babies-R-Us, a division of Toys-R-Us, have been liquidated, leaving in its wake thousands of small independent retailers that help expectant parents create that special nursery. But beneath that disruption are the lives of many individuals who built those businesses over a lifetime. Disruption, but at what cost?
I know the reaction of many at this point is, “But that is ‘capitalism’.” Don’t take this wrong, I am not saying change is bad. Do the math. I am a product of the sixties (the ultimate disruptors) and an early business career in the heady days of the LBOs (Leverage Buy Out). In our industry, the cry to put that capital required on the balance sheet to work to create shareholder value resulted in the industry manufacturing sector, losing the capital to automating manufacturing. The consequence was the loss of production to offshore. Yes, this was disruption, but at what cost?
As a young business school graduate, it was hammered into my mind that the capitalist system was efficient and would “punish” new ideas with failure. However, it was always with the caveat that a company has to contend with a competitor’s bad strategy until they went out of business. Today, the environment is slow to correct. Weekly, retailers question how etailers continue to increase market share by continuing to accumulate substantial losses. When will there be a correction? In the interim, independent retailers will fail. The latest projection is that we will lose a third of the stores in the next downturn.
The pace of change is increasing. A test by Ikea to rent furniture has become the buzz that will be a disruptor. At times, I believe change is attempted just because we can. Give the consumer their “Big Mac” at any hour, delivered at any hour by Uber Eats at twice the price. Should we? When the cost of the service exceeds the cost of the product, should we take caution?
Venture capital should be a positive contributor to improving society. But with cash pursuing ideas (good or bad) what is the result? I realize I will get incoming flack on this article saying that I am negative on capitalism, but maybe we need an adjustment to more positive, not disruptive, capitalism. The graph below is real. I have experienced each of these cycles. Even though the consumer is confident, should we be cautious?
Traditional retailers control 24.4% of the industry with sales on the uptick for regional chains. Unfortunately the Bureau of Labor Statistics is projecting 8,000 stores, which is about a third of the current count, to close. Mass merchants that absorbed the volume done by the national chains (Sears/Wards/JCP) has leveled out at 20%+/-. The internet continues to grow at 5.1%, but we believe this will level out at 20%+/- of furniture sold.
Our focus will be the total supply chain - not just the retailer to consumer - but also the supplier to the retailer. Facilitating the transfer of product from the designer’s sketch pad to the manufacturer to the retail buyer, forward to the retail sales associate, and finally to the consumer. A long communication channel to establish both knowledge and excitement about the product.
Step One: Selling the Retailer
Well, I guess I will touch the “third rail” and discuss the role of sales representatives in the furniture industry. Let me say before someone comes after us: we believe that sales representatives play an important role in the sales process. Our challenge is to better define that role.
While we believe the sales representative has an important role, we also believe that role is one of executing a sales strategy not defining the strategy.
Historically, the first step in launching a new company or a new product category was to line up the right sales team in every territory. Yes, there are still those individuals that can deliver the market. However, many are retiring along with the closing of many of the independent furniture retailers they served. A recent report by USB projects the loss of 8,000 stores by the end of 2020. Obviously, most of these are single store retailers.
However, the Regional Chains, those retailers that operate multiple stores in multiple states are expanding. There are sales representatives that have relationships with these retailers but more frequently, this relationship is the vendor’s vice president. Often, this is where the noise starts with the retailer “to give me the sales reps commission” and we will handle the training. Beware: this is a slippery slope.
But let’s return to the discussion of independent retailers served by independent sales representatives. The typical manufacturers develop additions to the merchandising lineup. Pricing is a function of maintaining a gross margin that satisfies the financial goals of the company, disregarding the significant value of the new design or more important, the merchandising price lineup in the industry.
The failure of many suppliers is pricing their product lineup above the market. The charge to the salesforce is to go forward and sell at least x% more because that is what we need. The “cat and mouse” game between sales managers and sales representatives is quite a kabuki dance.
For most manufacturers, there is no recognition of their marketshare in a particular market or for the most part, no recognition of those markets in which they have no presence.
What about those markets without sales — has the sales representative identified these opportunities? More important, has sales management? The point is: who is in charge of defining the strategy?
But most important, there is no expectation of service level. What is service level? Simply put, between major markets (High Point for most), how frequently do you want your sales representatives in front of the buyer? The most frequent response is “our sales rep knows.” It is the responsibility of the supplier to establish a specific strategy based upon performance or lack of performance of the retail account. If the account base performance is segmented into (3) segments: top performers, moderate performers, poor performers, it is the starting point of a sales strategy.
The next retort is: why would they want to meet? They will not change their assortment until next market. Talk with seasoned reps and they will recount those orders that they received by going through the door at the right time — when their competition is not delivering or sales have been declining for weeks. But, besides that spontaneous purchase, the buyer is constantly evaluating their merchandise assortment. Should the sales representative be proactive in changes? Seasoned sales representatives of the past “gridded” the retailer’s merchandise lineup, identifying missing price points and styles. Without a doubt, a time consuming effort, but it created a retailer ready to meet with a sales rep that provides sound input. With today’s analytics, it’s possible to provide that merchandise intelligence. What powerful information.
More important than the time in front of the retail buyer is the more immediate influencer of sales — the time in the store with the retail sales associate (RSA). Typically referred to as “training” it is more than that- it is establishing a relationship between the supplier and the sales floor. The fact is that people sell for people. The impact of the sales representatives recognizing that the retail sales associate’s performance when they visit the store is immeasurable. There are firms that prepare, online, product training for manufacturers which is very effective if executed. If the sales representative encourages the interface with incentives from the manufacturer during the visit, the sales representative can cover the major selling points for each product on the floor. That is what is needed by the RSA. It is more exciting and less boring than the technical details available online. Len Burke, VP of marketing at Klaussner Furniture says, “I have seen the work from the Furniture Training Company have positive impact on RSA’s and their retail sales.”
How often should they train? What should your training service level be? According to Impact Consulting Services (parent company to Home Furnishings Business), a firm that trains retail sales associates, the answer is at least every four to six weeks, and the focus should be on the newer associates. However, according to Mike Kua, senior consultant with the firm, the experienced sales associate should be encouraged to mentor the new associates, communicating the key selling points.
Does the sales representative have time to accomplish both meeting with the buyer and visiting the stores? Simply put, they cannot afford not to have the time. Based on experience shared by Kua, there is a direct correlation between time in the store and market share.
For a national salesforce with 19 to 20 sales representatives, travel time absorbs 50-60% of the sales representative’s day with the service levels defined below.
The salesforce is overbooked by 30% if they allocate 50 hours per week. This does not leave time for prospecting to cover the 70 markets in which the company does not have a dealer. What is the solution?
The first reaction is to rationalize the thought that “we don’t need to be in front of the buyer and in the store with that frequency.” You can make that decision, but with what impact on sales? Based on Kua’s experience, frequency of visit is a direct correlation to revenue. However, the major problem is that it is not the company management making that decision, but the sales representatives. The fear of territories being cut is what causes the sales rep to never mention lack of time.
What is the solution to reversing this dependence on the salesforce to determine strategy? The vendor needs to seize the responsibility by establishing some measures of performance.
Unlike the retailer, the typical vendor has no measure of performance other than volume produced. The equivalent of retailer close rate and average ticket is market share. What share of the potential market is your sales rep achieving? The table below illustrates.
The variance indicates the opportunity. The opportunity is achieved by more interaction with the buyer and more training time on the floor with the retail sales associates.
To begin the process requires an understanding of the territory performance by Geographic area (market) and dealers within that market. Sales management defines a service level. The computer establishes a detailed schedule for every day.
The immediate reaction is that it is impossible to have a strict schedule – which is true. However, the intent of the analysis is to confirm that it is possible to accomplish that level of service. If not possible, the alternative is to realign on sales territories and change the expectation. It can be the beginning of vendors reclaiming responsibility for sales strategy.
Passing the Baton to the Retailer
The pulse of the furniture retailer is the front door of the store. When the consumer breaks the counter beam… its game on. The culmination of the supplier’s effort to create product that excites the consumer’s imagination via advertising has brought the consumer through the door, and finally, the retailer’s presentation that created the best retail experience, all to create an opportunity to make a sale. So sell something! This is the frustration of the retailers. What are the barriers to securing the sale?
The most discussed factor for brick and mortar retailers is traffic or the lack thereof. The fact is that traffic was down slightly in 2018, leveling off from the trend of the past five years. According to data from (FurnitureCore, the research arm of Home Furnishings Business) it is not the same for all retailers. Smaller, independent retailers under $5M experienced a 6.2% decline while retailers over $50M experienced a 4% increase. While the popular reason for the decline in traffic has been ecommerce, which has contributed, the major reason is the reduction in stores shopped by the time-starved consumer. The major factor is the % of consumers that considered, not shopped. The graphic illustrates the results of a recent consumer survey documenting the results of their most recent purchase.
Obviously, this is a very competitive market with an average of 55% considering a retailer but 26% fail to shop. The decision by the consumer as to which retailers will be shopped illustrates the challenge. These seven retailers are the major traditional retailers of the total 88 traditional furniture retailers in this market.
If there is a positive in the decline in traffic it is that the consumer coming through the door has done their research and is ready to buy. In fact, in the past year our research shows that some consumers are shopping only one store. The attitude is, “If I had a good experience with my past purchase and the product is as represented on the website, why shop around?” This puts pressure on not only the retailer’s website, but the “final mile” in executing after the sale.
This well informed consumer coming through the door can be impatient. The expectation is that your retail sales associate can be as effective as the search function on your website in getting them to the product for which they are shopping.
Entering many of the furniture industry’s mammoth 100,000+ square foot stores can be daunting. The skill of the retail sales associates during the initial needs assessment step in the sales process is critical. Moving beyond product to style and then to price — while establishing rapport and understanding their unique household needs— while moving them to their lifestyle preference can be a challenge. This is especially true for Generation Xers (35-45) who are more attuned to lifestyle specialty stores that curate their merchandise assortment to a narrow target market. The lifestyle stores, such as Pottery Barn and RH (Restoration Hardware) have a distinct advantage with this consumer demographic. Ashley Home, which is a hybrid between a traditional furniture store and a lifestyle store, is very effective, serving a narrow (age) and deep (income range) target customer.
This more focused consumer is leading several retailers to experiment with stores with lifestyle store layouts. This allows the retail sales associate to get the consumer to the right area to begin the product presentation.
While in concept a good solution, it requires that the consumer with the retail sales associate identify their lifestyle. An assist that has been in use for several years is DesignCliq. It is a fun, picture driven quiz requiring only minutes on an iPad or screen to determine the users style preference. Analysis shows 89.1% agreement of “that’s my style.” The graphic illustrates the diversity of style today.
This well informed consumer has resulted in improved close rates and average tickets. For all retailers, the average close rate is 26%+/-. However, the larger retailers (100+) are achieving a more consistent 40% as can be seen from the graphic below.
Average tickets ($1,700+/-) with significant monthly variations can be seen from the graphic above.
Unfortunately, the cost to generate the opportunity (Ups) continues to increase. The challenge is to identify the best medium to attract the consumer. With the appeal of television declining among the emerging target consumer (Generation X), the industry is searching for alternative communication. But now the cost is averaging $27/Up. Unfortunately, the smaller the retailer the higher the cost. The graphic presents the performance for 2018.
Sales cost continues to increase approaching 10%, which will cause traditional retailers to consider other sales models besides the commission structure. Other distribution channels rely on hourly staffing with cost as a percentage of sales in the 4-5% range. The impact on sales revenue moving from a commission salesforce to a salary with bonus is the great unknown. There are $1M+ writers but the mode revenue level is less than half that amount. This consideration must be viewed in light of the ever increasing financing cost at the 3.0%+ level. What is motivating: the sale, lower prices, financing, or selling skills?
One obvious solution to cost is to produce more revenue per sales associates. Decades ago, training consultants impacted the industry profitability. With training programs, each with their own process - no matter five steps or seven steps – the programs produced results. Many of these programs have been brought in house, and in many instances, reduced results. Impacting the results is the acceptance by the new, younger retail sales associates of classroom training. There are still industry veterans, such as Profitability Consulting, JRM Consulting, and Impact Consulting, which still produce significant results. Bobby Infinger of Infinger Furniture in Charleston, SC says, “We set performance goals at the end of the year and Impact Consulting works with my staff to make sure we stay on track to our goal… it’s that simple… The outside perspective keeps me focused.”
Another alternative is online training from providers such as the Furniture Training Company. As with all processes, it requires constant follow up from management. However, if executed it will produce results. “We have been using the training for three years and it works!” said Sandy Howe, director of stores for Kittle’s Home Furnishings. “Not only has it been successful with our new hires, but it has been great for our veteran sales team. Because of FTC’s reporting services, I can easily manage the training in each of our 12 locations. I can’t think of training that has higher quality or is easier to use and manage than that of the Furniture Training Company.”
The most important element in improving sales performance is the sales manager. A full-time sales manager can more than justify the salary. For a $5M annual retailer with 12,500 Ups and a current close rate of 26%, an improvement of 1% would generate $200k in sales and $60k in contribution margin.
Many retailers make the store manager their part-time sales manager. This is a mistake. Where will the focus be? What about part-time for a senior RSA? It will not work. In the above example, the store should have six retail sales associates. The four to six hours per week of coaching will produce results.
There are retailers that have fully embraced sales management as an essential function. Many recognize that it is a profession, not just a job. To emphasize this recognition, they send their sales managers to a sales manager’s performance group where they share best ideas with other non-competing sales managers across the nation. When we interviewed several for this article, we received the following composite input:
- What is the single toughest part of your role?
- Managing and motivating people to give every customer they meet the shopping experience they seek.
- What numbers are most important for you to track and coach in order to drive sales performance improvement and how do you use them to do that?
- Close rate, average sale, revenue per Up, protection close rate, category mix, and house calls set up and sold are all important. These are used to drive improvement in total sales by coaching those that are below store average and/or performance agreement goal in each.
- How does or can your owner/GM support you and help you be more effective in your job?
- They support and reinforce what I do on the floor and meet with me weekly/monthly so we can work together on improving individual performance. We are a team that sends the same message to the staff and share the same vision for the store.
- What do you enjoy most about your job?
- The feeling of accomplishment I get when I help a staff member grow and develop into a successful professional sales person.
- What do you like least about your job?
- Dealing with sales people and customers that have unreasonable expectations or demands for issues they face.