From Home Furnishing Business
Minding the Numbers
By Sheila Long O'Mara
As furniture retailers continue to bounce back from the Great Recession, they’re paying close attention to a variety of metrics.
While the furniture industry as a whole would like to completely forget the dark years between 2007 and 2009, there are a slew of lessons to be learned.
Those dark and gloomy days of the recession had furniture retailers doing some real soul searching and number crunching to make it through to the other side. That struggling time taught many a lesson on where to look and how to come out stronger and better.
Retailers vary on the metrics they turn to for keeping tabs on their operations. In addition to the basics, many use new measurements or are re-evaluating the way they look at some of the old standbys.
Metrics like gross margin return on investment—the old GMROI—inventory turns, inventory to sales, traffic counts, sales close rations and average ticket remain at the top of the heap.
Managers at some stores track total inventory, GMROI, inventory on hand awaiting delivery, gross margin on written and delivered goods by category and vendor, sales by salesperson and by square foot, advertising spend and return on that spend.
The figures can be mind-swelling, but those bread-and-butter stats are key to keeping a retail operation going.
Woody Whichard at Midtown Furniture Superstore & Mattress in Madison, N.C., likes to keep up with his store’s close ratio.
“We don’t have a door counter nor a sales manager on staff keeping count,” he said. “This is the responsibility of the entire sales team and is tracked through their contact cards.”
Individual and store gross margin sales are reviewed every Saturday morning during a sales meeting. The results are shared with the entire staff. Whichard is a stickler for following closely to the budget.
“The budget is very important for us to create and stick to as a course of action throughout the year,” he said. “The budget is watched daily.”
For Acton, Mass.-based Circle Furniture, it’s all about merchandise turns.
Peggy Burns said she things too many furniture people get stuck on tracking gross margin return on investment when at the end of the day it’s all about selling furniture.
“If something is a dog, it doesn’t matter,” she said. “If I put something on the floor, I want to see that it’s turning and earning its keep.”
As for just how much a product has to sell? It’s all relative, Burns said, but at the minimum it has to turn several times a month to remain in Circle’s merchandising lineup. If not, it’s gone and another product takes its place.
Like other retailers, Travis Garrish of Forma Furniture in Fort Collins, Colo., there’s not just one magic, go-to number that is the Holy Grail. He does, however, have a first stop, and it’s just as Burns said—gross margin return on investment.
“I always look at GMROI,” he said. “That’s been our focus this year. It does change with what needs the most attention at any given time.”
It’s the Quality
A key element to all retailers is how well their team is grooving. How’s the attitude quotient? Happy people tend to work harder and harder workers sell more.
“The main measure I look for is a good attitude every day from every team member companywide,” Whichard said, adding that good attitudes translate into a better customer experience for consumers shopping the store.
Several retailers mentioned positive attitude and high levels of customer service as important aspects of maintaining and building a loyal customer base. Retail is all about the detail and ensuring each minute one is managed.
Here are a few areas that retailers like to watch and ways to get the most out of every metric for successful retailing. Some are top-of-mind ideas, but always good to repeat.
1 Occupancy Costs
If you lease your building, consider renegotiating your lease rate. It never hurts to ask, and your landlord could be willing to cut a deal.
Lower costs by ensuring you get it right the first time. Prompt, clean and neat or words to live by and cuts down on return trips.
3 Cash Flow
Daily sales and deposit reports are must. How are receivables? Staying on top of cash flow is critical.
Set an annual budget and stick to it. Make a point to examine where you stand on a regular basis.
5 Merchandise Mix
Check the store and warehouse for product you’ve always had on hand but rarely sold. Get it rid of it.
Safety in Numbers
Furniture retailers are finding safety in numbers when it comes to idea and information sharing.
Through retail performance groups, independent retailers are pooling ideas, financials and support to stay on top of emerging business trends, merchandising trends and smart ways to run their businesses.
Are you having trouble finding good ideas for advertising? Do you know what marketing or categories are bringing positive results for other retailers? Are you tired of ordering goods at market that don't pan out sales-wise?
Performance groups give dealers the chance to gather with like-minded peers to exchange ideas, swap best practices and in some cases, conduct shared financial analysis. Such analysis allows retailers to rate their operation relative to others in the dealing with many of the same issues. (Full disclosure: Impact Consulting Services, parent company of Home Furnishings Business, helps run a number of retail performance groups within the industry.)
The concept of performance groups emerged from the automobile industry, where competing companies joined together to share information they used to develop performance standards each could use to measure themselves relative to the industry as a whole.