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Numbers That Count

By Home Furnishings Business in on May 2013

€œThere are lies, there are damned lies€”and then there are statistics.€

It€™s an old saw, and while outfitting customers with products that match the lifestyle of their dreams takes a human touch, today€™s furniture retailers€”especially if they€™re running operations employing more than a few people€”can€™t ignore the numbers that tell them what they€™re doing right and also where they could make some improvements.

Analyzing your stores numbers is more than bean counting. It€™s about pulling what€™s really useful out of the huge amount of information generated even by basic store operating systems. As important€”communicating what you find to your sales team and management personnel in an effort to help them do their jobs more effectively.

Numbers alone aren€™t enough, said Bob George, CEO of Impact Consulting/FurnitureCore€”it€™s more about understanding what they mean, and using them to execute a business plan.

At the recent High Point Furniture Market George gave a presentation, €œBig Data,€ on how retailers can better utilize the huge amount of information their Web sites and store systems generate.

€œThe key to utilizing data is understanding the sorts of information; using it to identify customer segments and the opportunities they represent; using data for better promotional execution; and monitoring the results,€ he said.

That can be a daunting task considering how much information a store automation system can generate. The first step is to create a place where that data can be organized and accessed, and George used the smart phone as an analogy.

€œEvery one of you probably has a smart phone,€ he said. €œThink about how much information you have on that phone€”pictures, addresses, contacts€”you€™ve probably become dependent on that phone.

€œTake one piece of data and expand it from there€”it€™s the what you did with your phone€”your kids pictures, your calendar. Do it with you business in the same way.

Take that concept of all that information you have and layer it in. €¦ If you don€™t integrate that data and pull it together, you can€™t use it.€
Create a place to store that data.
€œThe cost to store that data has fallen dramatically, and you also need the speed to get at it,€ George said. €œWhere it should end up is where the rubber meets the road€”in the salesperson€™s hands. How can you use that data to influence the sales process?
€œWith €˜Big Data,€™ the goal is to be able to say, €˜Bill bought something, but I knew he was going to buy it.€™ He went to the Web site and asked about this SKU. Help your salespeople facilitate that movement from €˜I think I need some furniture€™ to €˜I€™m going to buy some furniture.€™€

TAKING MEASURE
Traffic measurement, along with inventory, closing rate (both team and individual) and average sale, are absolutely critical sources of information, said Profitability Consulting Group CEO John Egger.
You might have those numbers, but understanding what they really mean takes deeper digging. Analyzing traffic numbers, for instance, is more than counting bodies.
€œIf you want to, drill down and use cameras at your door you can measure things like groups of people, family, ethnicity,€ Egger said. €œIf the raw numbers say 80 people came in, that drill down will tell you that you had, say, 12 families, six groups of women, etc.€
Again, looking beyond the numbers, analyze where shoppers go in the store. Where do they stop?
€œWhat if 70 percent of people stopped at a particular vignette?€ Egger said. €œThat€™s going to tell you something you can use in your merchandising.€
Say you€™ve been gone for a week, and sales were half of what you€™d counted on for that period.
€œYour immediate reaction is to get all over the salespeople, but maybe there was a storm, maybe you were understaffed,€ Egger said. €œThere are a lot of things that could have happened to let you know if there was a real problem with your people.€

DIGGING DEEPER: INVENTORY
Knowing how much furniture you have in your warehouse and on your floor, and how often you turn your inventory hopefully got covered in Retail 101.
Knowing you have X dollars in hand and that you turn it X number of times a year is fine, but if that€™s where you€™re stopping, those figures don€™t really help you figure out how to make that investment in goods make money.
Do you know what part of that inventory has been sitting around for a while? Staying current on aging inventory is critical, Egger said.
€œSomeone has to be in charge of an aging report, and keep track of €˜not in location€™ or €˜not available for sale€™ items,€ he noted. €œThat stuff can stack up to thousands and thousands of dollars. Suddenly you end up with $500,000 in dead items that could be cash. Someone has to be accountable for that.€
Egger shared an analysis Profitability Consulting Group performs for clients€”slot cost.
€œWe go into a warehouse and see how many slots can be filled there,€ he said. €œWe take total occupancy cost and divide that by slot€”that€™s the slot cost.
€œIf you have X amount of slots, we know that piece of furniture costs you X amount of money to sit there. If you have 1,200 slots that are (not in location) or (not available for sale), that could be replaced with merchandise that€™s making you money.€
DIGGING DEEPER: TRAFFIC
While more than 50 percent of American retailers have installed traffic monitoring systems, they don€™t always apply the information gathered to improving sales, according to Michael Bunyar, president of Montreal-based SMS Store Traffic.
SMS€™ furniture retail clients include names such as Ashley Furniture Homestores, City Furniture, Dufresne and The Brick.
Today€™s traffic counting technologies now provide queue management data, age and sex recognition, hot spot identification, group counts, employee elimination, dual view cameras and more.  But retailers can do more to apply what they learn from those numbers to convert shoppers into buyers.
In applying store traffic to your operation, Bunyar said customer-to-staff hour ratio is one of the most useful ratios you can generate.
€œThat€™s total traffic divided by the number of staff hours you use in a given day, or period of the day,€ he said. €œIf your customer/staff hour ratio is 15, that means everyone on your floor dealt with 15 people. When you get to 30 or more, there is simply no available service. The floor staff is getting pulled every which way.
€œWhen you look at that ratio on a daily basis, people agree that Saturday and Sunday are the big hours. The ratios for those times are typically the worst of the week, meaning your highest traffic is getting the worst service of the week.€
That ratio could well be an acceptable 15 on Tuesday or Wednesday, but if it€™s 25 or 30 on Friday, Saturday or Sunday, you might be burning turf customer-wise.
€œJust re-establishing staffing levels, bringing a little more available service to your key selling days has a huge impact,€ Bunyar said. €œThe bottom line is that most retailers are desperate to increase sales. It€™s all about your conversion rate. Are you selling 1 to 2 percent of your traffic? That€™s a problem. Just adjust staffing so when people come into your store you can give them the service you need.€
Are you already selling 20 to 25 percent of your traffic? Taking it to 26 or 27 percent represents a huge impact in sales.
€œIt€™s an easy fix, it€™s a quick fix, and it€™s an inexpensive fix,€ Bunyar said. €œIf you talk with store managers, you find they€™ve been petitioning their head office for years to get more people, but are told they€™re staffed properly for their sales level. Improve the service, and you€™ll improve the sales.€
DIGGING DEEPER: SALES
Jeff Winter is an owner at Discovery Furniture in Topeka, Kan., along with brother Jamie Winter. The operation includes Discovery Furniture, RoomMakers stores carrying Ashley goods Mattress Headquarters locations in Topeka, Kan., and Lawrence, Kan.; and an Ashley Furniture Homestore in Salina, Kan.
Discovery/RoomMakers has deepened its sales analytics in the past couple of years. More important, management puts the information it gets to work on managing and counseling its sales team and managers to help them perform more effectively.
€œAll the information is in our computer systems€”what was purchased, who bought it, who sold it,€ Winter said. €œWe have several components in the analysis we do. That includes normal sales specialist measurements like sales per hour, sales per guest, average sale, sales productivity.€
Discovery analyzes by week, month and year for each person; and it graphs that information by performance, and by furniture category.
€œThe manager sits down with each person so they know where they stand,€ Winter said. €œIt€™s making it so you can change and improve. €¦ You can€™t improve what you can€™t measure, and it all leads to communication.
In the past year Discovery has added protection sales and delivery into the measurements the business tracks.
€œWe put those in because people who purchase product protection and delivery are our happiest customers,€ Winter noted.
 Sometimes, for example, customers decide to pick up the furniture themselves, and end up damaging it.
€œThat€™s not our fault, but you still have an unhappy customer,€ Winter said. €œSay a customer opts out of delivery. We€™re able to identify that, and help (the salesperson), coach them.
€œWith a lack of information, people tend to think they€™re above average. Everyone wants to do a good job, it€™s a matter of helping them with specific things, specific sales tools.€
Discovery looks at those same measurements by store and by each category. On a graph, a gold bar indicates expectations are met or exceeded; green means performance exceeds the prior period of measurement, be that year, month or week; and red indicates performance trails the prior year.
€œWe€™ve formatted how we get that information into people€™s hands, and it€™s compiled every hour,€ Winter said.
Daily text compare performance by day, week, month and year; and store managers see not only their store but also every other store.
€œWe also have merchandising tools, managing that in a real-time war room,€ Winter added. €œWe determine what€™s generating our gross margin dollars.€
It€™s all part of re-thinking the way retailers can apply the numbers available to them in their business. HFB

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