Wanting It All

September 30, 2008  by in UnCategorized   

By Home Furnishings Business in on October 2008 When it comes to business metrics, furniture retailers basically want it all. That means technology that delivers up-to-the-minute sales totals, rankings of top-selling products (and sales associates) and instant access to cash flow, back-order and vendor performance metrics, according to systems vendors and business management consultants.

Oh, and retailers also want comparative analyses that show today’s numbers measured against last year’s figures. In addition, retailers want it all in easy-to-read graphical reports that are preset to reflect the items they deem most important. Finally, some store operators also want to be able to call up those reports on a home PC—or even a cell phone or PDA in some cases—no matter the time of day or night.

In short, retailers crave accurate, real-time data, especially in times of economic uncertainty.

“The quicker you can react as a retailer, the better off you will be,” said Mark Van Winkle, director of sales, Storis, a software provider with a focus on the furniture industry in Mt. Arlington, N.J. “To be able to have that information right in front of you right away is so much better than having to rely on having staff members to create multiple reports you have to go through to uncover trends.”

THE BIG PICTURE Rather than focusing on individual measurements, furniture retailers want an easy-to-digest overview report that combines the latest sales (and other performance) figures. “Right now, retailers want to see a big picture of how every part of their business is going,” Carolyn Crowley, president, Myriad Software, a San Diego-based software company that is focused on furniture. “I’d think most systems provide a broader picture of everything from sales to the number of back-ordered items, so they can make sure they fill the orders of those customers and get those products delivered” as quickly as possible.

Both Storis and Myriad provide constantly updated reports for top executives that show key measurements such as sales (both written and delivered) as well as cash flow and rankings of top salespeople, categories or vendors (for that day or week or a longer period the executive selects). With the Myriad system, the reports the company calls its browser module can be called up on a cell phone or a PDA. “It’s very broad and gives the executives a big picture of how every area is doing with numbers,” Crowley said. “If they want to drill down a bit more they can get more details” or sign on to the system with a PC for even more detailed reports.

The Storis system, which is accessed through a PC, has a similar report it calls “Executive Vision” to enable top managers to “easily see (key) information in real time and react as its happening,” Van Winkle said.

SELLING MORE THAN WHAT’S ON SALE Van Winkle said retailers usually want to view sales data first and those with multiple stores like to see data from each location. Close behind in importance are rankings of store sales associates and brands or vendors. With the information on sales associates, he said it becomes easy—with a quick comparative analysis—to see that a top salesman is outproducing almost everyone in terms of total sales, but may have a lower-than-average ranking when it comes to gross margin: “That sales associate might be discounting too much or pushing just sale products. Giving the executives that information at their fingertips enables them to react accordingly.”

Van Winkle said brand or vendor comparisons helps an executive quickly assess the performance of a particular brand or category: “You can see what a particular vendor did for your stores this year as opposed to last year, and an executive wants to have that information in front of him when a rep comes in so they can discuss how that brand is doing.”

Profitability Consulting Group CEO John Egger said some key furniture store metrics never change, especially performance measurements like a store’s closing rate. He said many retailers can become more effective by putting more of a focus on inventory by ranking a category both as a percentage of sales and as percentage of inventory. The measurement can help determine which product areas are pulling their weight in the store. “You might find that bedroom, for example, is 15 percent of sales, but 30 percent of inventory, which would be way out of a line, but it’s amazing how many (stores) don’t do that comparison,” said Egger, who is based in High Point.

He said it’s also important to keep track of inventory aging: “So many stores have, as an example, $2 million in inventory, and $500,000 of it has been there for more than a year.”

PLAYING CATCH-UP AS GAME CLOCK TICKS AWAY Crowley said CEOs viewing a report via a browser module often toggle back and forth between views that show sales figures for a particular day, week, weekend or a month. “Today is the 24th day of a short month (September), so, depending on how things are tracking, do you start planning a special promotion with an e-mail blast to your key customers? It’s really a help to be able to look at ways to promote after seeing the results from the first half of the month.”

She said being able to access real-time sales data remotely from a home computer, or even a mobile device, frees executives to spend more time outside their office “and still be able to know what the pulse of their business is.”

NOT YOUR FATHER’S FURNITURE STORE Bob George of Impact Consulting said many retailers are still focused on quarterly comparisons or store traffic numbers that are increasingly misleading.

“Quarter-to-quarter sales comparisons are sort of embedded in retailers’ minds because that’s the way their father did it and their grandfather did it,” he said. “It used to be we lived in an agricultural society, but we don’t have that economy any more. Credit wasn’t as free (in the past), so a consumer had to wait for her income tax refund or bonus check” to buy furniture. “Now, with credit cards, most people can make a purchase any time and pay for it over time.”

At the same time, he said store traffic numbers are down across the industry as shoppers make, on average, two store visits rather than the three or four that were typical a decade ago. With lower traffic levels, George said, “Some retailers say, ‘I need to advertise more!,’ but that’s not necessarily the answer. It may be that they need to learn to use the Internet” more effectively.”

LOOKING OUTWARD, NOT BACKWARD Increasingly, George said, some retailers are striving to go beyond measuring current sales against past numbers in order to focus on market share and other outward-looking metrics. “A retailer knows when sales are down,” he said, “but if his market share is the same as it was two years ago, then that store is getting its fair share. But, if a store is losing market share, there’s a different set of reactions to that because someone is taking their business.”

It can be expensive to have a market study conducted for a store, but George said sometimes local newspapers or other sources can provide useful market information. At the same time, a retailer can help understand some aspects of a store’s performance in comparison to other stores by joining a performance group or by participating in performance groups or initiatives like the NHFA’s Retail Operations Performance Report. Taking part in multi-retailer groups enables a retailer to measure performance measurements like closing rates or average tickets against other stores of a similar size.

TOO LATE TO START NOW Over the past year, George has had several encounters with struggling retailers and came away surprised by the lack of record-keeping in those companies: “When you get in trouble, it’s too late to go back and start to create these numbers. A lot of them don’t know what their closing rate or average ticket is. You can’t go back and capture those, so I’ve been surprised by how some retailers don’t have the numbers they need to make important decisions.”

Van Winkle said most of the retailers who deploy Storis technology already have a computer system in place, and are generally seeking a system that is more user-friendly and is designed to incorporate advanced tools as new technology and functions are developed.

WORST-CASE SCENARIO: DAYS CASH OUTSTANDING Ren Baker of CDS Solutions Group said that during challenging economic times, the best way to assess a store’s health is by measuring what he calls “days cash outstanding”—the number of days a store can continue to operate with no income at all.

It’s measured by adding up all expenses and dividing by 365. With the resulting sum and the amount of cash, retailers can work to have a cash buffer for emergencies. One of the benefits of the measure is that it works equally well for a $2 million business as it does for a $200 million company.

Baker also advises companies to chart sales on a month-by-month basis over the prior 24 months to produce a trend line that can help store owners identify trends on a longer-term basis.

Roy Martin of Escalate Retail, a software provider based in San Diego, said retailers are increasingly focused on measuring shipping costs, both in moving containers from Asia and in delivering to the customers.

Secondly, Martin said, retailers need to closely analyze the costs of financing promotions, in particular, by asking, “Am I giving up too many points to get the sale that is financed?” Martin said a close analysis could show that a no-payments offer could be as effective as a no-interest, no-payments sale over a given weekend. “With the competitive nature of the world right now,” he said, “that kind of analysis is something retailers really ought to do to (determine) how much it’s costing them to make this sale” using financing.

He said furniture stores across the country are also closely analyzing the cost of same-day deliveries versus next-day deliveries in terms of whether a same-day delivery promise produces enough added sales to justify the expense of providing it.

Egger of Profitability Consulting Group said many retailers track “Perfect Delivery Percentage” to help delivery crews focus on the importance of avoiding repeat visits to a customer’s home.

“You should set a standard of, say, 96 percent to 98 percent Perfect Delivery Percentage and pay a bonus when that’s achieved,” Egger said. “When you look at the cost of gas and (the value) of making a customer happy, you can save a lot of money.” HFB