Safety in Numbers

September 30, 2008  by in UnCategorized   

By Home Furnishings Business in on October 2008 There’s no shortage of independent furniture retailers wondering what it will take to achieve a positive bottom line at their store—especially in the face of recent economic tumult that’s added an extra insult to the twin injuries of dwindling sales for many, and increased costs of doing business for all.

Some retailers find support, if not salvation, through furniture store performance groups, where they gather with non-

competing peers sharing similar business models to exchange ideas, swap best practices and conduct shared financial analysis, rating their stores relative to others in the same boat.

Performance groups emerged from the auto industry, where competing companies got together to develop performance standards each could use to measure themselves relative to the industry as a whole.

While a small percentage of store owners participate in such groups, those who do are enthusiastic about their benefits.

Freedom Furniture & Electronics has participated in a performance group through Profitability Consulting Group for eight years. Link Melley, CEO and president of the 10-store Norfolk, Va.-based credit-oriented chain, is convinced such groups are one of the most important things a retailer can do for his or her business.

“The central issue is that you build business models for the worst possible times to take advantage of every possible opportunity,” he said. “You have a plan in place.”

Getting access to other retailer’s best practices, he said, is vital to having a complete business plan: “What we’ve noticed is that some of our newer members—and some older ones—have a hole or two or three. You not only don’t maximize your profits today, you don’t protect in the long term against market downswings.”

Performance groups grant access to the business plans of other retailers for store owners to apply to their business and make changes—if they’re willing, Melley said.

“Implementing change is tough enough when things are moving smoothly, so making changes in difficult times is a supreme challenge,” he noted.

FACING THE CHALLENGE Giff Gates, owner of Grants Pass, Ore.-based Gates Home Furnishings, used his group with Impact Consulting to take on that challenge.

“Especially in a time like now, you can spot your weaknesses and strengths” through comparing numbers with other members, he said. For example, the performance group helped Gates get a handle on “non-handling” employees—that is, those staffers who aren’t selling.

“I never would have known how overstaffed and inefficient I was,” he said. “For years we were so profitable, it didn’t matter. ... I get this spreadsheet that shows, line item by line item, every indicator you can think of on a financial statement.”

Steve Forberg, CEO of Decorium in Toronto, got the idea for a monthly “dashboard” report with information on everything from sales and inventory levels to service performance and other operational issues on a single page from his performance group, also through Impact Consulting.

While meetings let each member measure their business against non-competing peers, Forberg said the real value lies in the ongoing relationships members develop: “We’re swapping a lot of e-mails between meetings. If I’m working on a flier, I can call 13 other guys and get some feedback.”

Decorium has participated in its group almost 10 years.

Stephen Kidder is principal of Williston, Vt.-based PK Management, which operates three Vermont stores: Vermont Furniture Galleries, Superstore Furniture in Williston, and Total Home Center in St. Alban’s.

His company’s been in a performance group counting around 10 stores from across the U.S. for 15 years. Like other groups, Kidder’s meets a couple of times a year in person at different members’ stores.

“As a result of this group interaction, we have developed daily, weekly and monthly reporting tied to key metrics that allow us a quick overview of the key areas of operational management,” Kidder said.

While periodic face-to-face meetings are where the group examines its aggregate number and rates performance, those gatherings aren’t the end of the interaction. A lot of e-mailing and phone calling takes place on a very regular basis.

“We let one another know what’s working in our stores, product, vendors, ads,” Forberg said. “If someone has a good week or a good campaign, we share it.”

ANSWERING QUESTIONS Are you having trouble finding good ideas for advertising? Do you know what marketing or categories bring positive results for other retailers? Are you tired of ordering goods at Market that don’t pan out saleswise? Do you have business questions that are never answered—or even asked—in seminars or conferences?

Those are some questions Phyllis Zaepfel asks potential members of the performance groups she facilitates as VP of Profitgroups, the performance group division of Colorado Springs-based furniture retail software vendor Profitsystems (group membership includes retailers who aren’t software customers). Profitgroups consists of five performance groups totaling around 50 retailers.

Those include store owners from Thomasville and Mega Group’s Countrywide retail network in Canada, and three groups of independent retailers, sorted by volume and number of stores. Zaepfel said members become a board of advisors for their colleagues’ businesses: “When I talk to people in our groups, they’re doing remarkably well—considering what you hear about furniture retailing right now.”

Ron Huddleston facilitates groups for Impact Consulting. He prefers to keep a low profile about such networks since he believes they’re “not about the facilitator, they’re about the members,” but shared his thoughts on their benefit to retailers: “I know of members who’ve substantially changed their approach to their business and their procedures. Groups become working entities, another step in their efforts to enhance their business and have a positive bottom-line impact.”

“They can have the minds of 15 people, 15 different market approaches,” Huddleston said. “They’ve broadened their scope and the scale of their thinking.”

John Egger, CEO of Profitability Consulting Group, identified two big benefits, one qualitative and one quantitative, of performance group membership: “One, you get support from fellow members for any problems you might be having. You have 20 eyes on an issue vs. just your own.”

Most importantly, shared metrics give retailers a better opportunity to respond quickly to where their business is going.

“We’ve drilled down the metrics so consistently that any trends are obvious in the numbers,” Egger said. “A lot of retailers work on gut feel, and some are pretty good at it. But with shared metrics, there’s no guessing. You know what’s going on. Those numbers are the key to performance groups. If you see a trend, you can examine your operation to find out where and why it’s happening, and how to adjust.”

WORKING THE NETWORK PCG performance groups include gatherings of retailers with similar business models or shared traits such as credit operations, La-Z-Boy stores and retailers who are members of the same buying group. Each group has 10 to 20 members.

“The idea is to get similar operations,” Egger said. “You don’t want to put a mom-and-pop in with multi-store, central warehouse retailers.”

Huddleston noted that store operators working in large national or regional chains can find information-exchange and networking opportunities within their own company. “Most independent retailers don’t have that sort of resource for feedback in their store,” he said.

The information exchange doesn’t stop with the meetings: “Once you’re in a performance group, you’ll find the members are continuously talking to one another between meetings,” Huddleston said. “They have a confidentiality agreement, so they can discuss some very private and important issues.”

Egger agrees that ongoing contacts and feedback are an important aspect of performance group membership. “They really become close—sometimes good friends,” he said.