From Home Furnishing Business
IS IT JUST IN MY STORE THAT TRAFFIC IS DOWN? — MAYBE
2017 by Jane Chero in Business Strategy, Industry
This common refrain at the April High Point market was consistent with what is happening to traffic. Obviously, the economic results (GDP) for Q1 reflected an anemic .7% increase when compared to 2.1% for the previous quarter and the same quarter last year at .8%. While not a substantial decrease over last year, it was still the weakest quarter in three years.
The furniture industry, including bedding, struggled along at 3.0% (Q1 2017 to Q1 2016), a growth we should be content with reflecting on all retail at 3.6%.
So, what is all the noise about traffic? Traffic has been declining for the past decade as the time-starved consumer relies more on internet research which can be done while multi-tasking late at night when the kids are finally down and there is some “me” time. Statistically, the number is right at two stores shopped before purchasing. This is significantly down from the four to five stores a decade ago.
Unfortunately, the changing consumer buying process has created a segregation of “have” and “have not” retailers, those with the traffic and those that are asking what happened to the traffic. Unfortunately, the easiest thing to blame is the intrusion of the e-tailers into everyone’s marketplace. It is true that this new channel has captured 15-17% of furniture and bedding sales. But, this is not the reason for the decline in traffic. For major furniture purchases, the consumer who purchased on the internet still visited a “brick and mortar” retailer.
On average, about 50% of the consumers that purchased furniture visited the furniture store first and then proceeded with research on the internet. The other 50% do their research first and then visit the retailers whose site inspired them. It should be stressed that when not an e-commerce site, the typical time spent on the site is 4-6 minutes, not the in-depth research, but more “this retailer has the style/brands and price points I want”. Only later do they drill down to the specifics. The graphic details the steps and priorities.
It should be stressed that this is not a drawn-out process. In fact, over 50% of it is over and done in less than two weeks.
The fact is that the time-starved consumers do not have the inclination to extend the process and enjoy decorating their homes. If we look at the percentage of consumers that consult a professional designer as the first stop, it is small. In discussions with the ever expanding cadre of “designers” in the industry, it becomes obvious that there are more “personal shoppers” than certified designers.
We should stop berating ourselves about the “retail experience” that we provide consumers. In fact, more than 85% rate their experience above average and 27% rate it as excellent. This is much better than other consumer experience ratings in other retail sectors.
So, where is the traffic? It may be in your competitor’s store. With Impact Consulting’s monitoring of what they define as high performance retailers, the traffic has been constant. The sample is national, including in proportion retailers with sales from $5M to $250M. There has been little change in traffic until the fourth quarter.
But, this volume of traffic is reflecting the growth in industry sales. However, it should be noted that the high performing retailers’ performance was to increase close rate and average ticket.
The lesson learned is to treasure each of those opportunities (Ups) and to transform them to a sale. Unfortunately, the focus on sales management decreases as the retailer’s revenues increase because the owner is further away from the selling floor.
For well-managed retailers, the cost of attracting the consumer into the store is averaging $23/opportunity which translates into $70-$100 for each sale at a 30% close rate, a significant percentage of the gross profit generated on each sale. Visualizing each consumer through the door as a potential loss will focus an owner on the importance of sales management.
So what do we do about it? Read on.
The Proper Mix of Coaching and Number-Crunching to Keep Business Humming
Sales management is a key function in any wholesale or retail organization that has products or services to sell to a consumer – the elixir in any effort to maximize the business. Most products do not sell themselves, so some sort of sales interaction is necessary.
Managing what, when and how that process happens is an important element of the success or failure of the business. The more competitive an industry and marketplace is, the more critical it becomes. Therefore, since retail home furnishings is often one of the most competitive big ticket arenas in every market, it can be argued that managing the productivity of a retail furniture store’s sales staff is one of the most vital tasks on manager’s ‘to do’ list.
It also appears to be one of the most difficult, since it involves managing people and their behaviors when they work with consumers. Much like creating and leading a highly successful sports team, there are many parts of the process that demand a constant, consistent effort in order to win games.
The retail furniture store’s “playing field” is the selling floor and the “players” are the sales people who are hired, trained and coached to provide the level of service retailers want their customers to receive.
The person responsible for this process in most retail organizations is called the “sales manager” and that person carries the burden of delivering the sales revenue that drives businesses. Since their focus is on the performance results of the sales staff, their function is very much like a coach or manager of a professional sports team, and their primary goal is to deliver as many “wins” or sales as possible.
In many stores, particularly smaller ones, this involves the entire range of management functions from recruiting, hiring and training new people, and managing what happens on the floor, to helping make sales and providing customer service support for the sales team. But in all cases, the most important task should be, as the title says, sales management. This mainly involves training, coaching, motivating and leading the sales team’s effort daily to make certain the store gets the maximum return from the traffic its advertising and marketing programs deliver to the sales floor.
And for countless furniture retailers such as Steve Nye, general manager of Engles Furniture in North Bend, Ore., those skills have become even more critical in recent years as store traffic counts have fallen.
“With lower traffic counts trending each year, we have to sell the consumer more and more often,” said Nye. “I can confidently say customers want the nicer leather sofa with articulating headrests, instead of the one they saw for $499 in your advertisement, and they want the functional adjustable base to go with their new mattress, along with new pillows and sheets. It’s our sales people’s challenge to show them why.”
That puts pressure on sales associates to increase close rates and average ticket, but Nye and other sales managers said those aren’t the only performance measures they look at when evaluating performance.
“I believe in looking at close rate, average ticket, revenue per up, sales volume, fabric protection, and mattress performance to evaluate performance,” said Nye. “They are all individual indicators to focus on improving. If someone else on your team can close at 40% -- the coach-speak is ‘How and what can we do to get you there?’
“When it comes to weak performing situations, I put the most weight on performance index – it tells you everything about a salesperson’s situation when combined with traffic.”
Sara Lawson, sales manager at Infinger Furniture in Goose Creek, S.C., said she closely monitors the close rate and revenue per up for her eight-person sales staff since her store caters to a higher-income clientele and focuses on upper-middle to upper-end merchandise.
“If you can get the revenue and you can get the close rate, everything else kind of falls into place,” Lawson said.
She said it’s not unusual for an Infinger customer to make three or four visits to the store before making a purchase decision, so in this era of lower store traffic, it’s critical to at least convince the customer to pay a return visit if the sale can’t be closed right away.
“I try to encourage them to be aware of their close rate, especially the close rate compared to the return customer rate,” Lawson explained. “The faster you can close them means you won’t have as many return customers. But customer return rate (by itself) is not a good measure.”
And since the counting of those ‘ups’ that are so critical to performance has undoubtedly caused more than a few internal disputes, both Lawson and Nye said it’s essential to have a reliable and accurate system of measuring them.
Lawson said Infinger’s kept a door count manually until last summer, when the retailer installed a DoorCounts camera system that takes a picture of everyone entering the store. She said the photos serve as a cross-referencing tool that help the store’s greeter (known as the concierge) keep track of the sales team’s rotation.
“I’m very fortunate, because I’ve never had an issue where people are either missing a customer coming in the door or they’re cherry-picking,” said Lawson. “The person that they get is the person that they get, and they should try to maximize that.”
She said the DoorCounts system is especially effective during busy periods, and helps the concierge get a returning customer in touch with their sales person more quickly. “It works especially well when you have multiple sales people working with multiple customers. And that happens every single weekend,” she noted.
Lawson is a big believer in using a concierge, and said her store has one on duty seven days a week. Not only does that person greet customers and keep track of traffic, he or she answers the phone and calls sales people for their ups.
“Sales people can be doing other things without having to constantly watch the door,” she said. “But the really great thing with the concierge is that when somebody comes in and specifically asks for (a specific salesperson), they’re able to catch it before it goes too far. You’ve got somebody there who is managing the front door. You’re not missing out or getting mixed up in your rotation.”
Practices such as that keep tensions and employee turnover down, which both Lawson and Nye believe is another critical factor in today’s lower-traffic world.
“The first and most important element to retention is proper training to begin with and ensuring all salespeople have every tool needed to do their job without obstacles,” Nye said. “I think after that, the company culture of growth and success in combination with goals and communication keeps everyone working in the same positive direction. The practices driving that would be consistent training in furniture and selling practices, sales games to keep things fun, comradery and competition between sales people, and individual one-on-one meetings between the sales manager and sales people at least once a month.”
And interestingly, when they’re looking for new sales people, neither specifically targets candidates with furniture industry experience.
“If they had a successful employment experience with a furniture company similar to ours with a customer driven selling system -- I definitely look at that as a big positive,” said Nye, “but I don’t believe in putting too much value on just any previous furniture experience. I’m more interested in learning if they have a strong potential to stick with me through time.”
Nye said he begins evaluating potential sales people as soon as they walk in the front door – literally.
“The characteristics I look for with a salesperson begin with the way they carry themselves when they are greeted at the door by a salesperson and taken to the office to fill out the application,” he said. “Witnessing those interactions tell me quite a bit about an applicant’s connection skills and ability to work well with others.”
Lawson agreed that working well with others is critical, and can be the determining factor in many hiring decisions.
“Seeing them in action is always the best way. I want to see how they communicate, how articulate they are, and how well they know their product,” said Lawson. “And it’s especially important how they interact with their colleagues.”
Although two current members of staff used to work for Bassett, the store’s largest vendor, she also doesn’t put a lot of stock in previous furniture industry experience.
“I used to strive to find someone who had furniture experience, but now I realize it’s more about just being able to handle the floor,” she explained. “I’m looking for someone who can walk in and feel confident enough to be on their own…learn on their own…and is willing to be coached by me and their peers.”
“It’s more of an interest in furniture and an interest in interior design. If you don’t have the interest, then you can’t be effective. You can be the best sales person in the world, but if you have a passion for cars and you’re selling furniture, it’s not going to translate that well. I think people trust you more when you’re passionate about something.”
Instead of looking for furniture experience, Lawson said she frequently recruits sales people from nearby restaurants.
“Because most of the restaurants (near the store) are higher-end, they’re dealing with the same clientele, so it’s not that difficult to transition from being a server or bartender into this type of work. They’re commission-based, essentially, with tips, so it’s not as scary for someone who knows they have to put their best foot forward in order to make money,” she said.
Lawson and Nye also said old-fashioned word of mouth is an effective recruiting tool, although Nye said he’s happy he has needed recruiting tools only sparingly in recent years due to extremely low turnover.
“We provide an environment where people are consistently challenged and learning. This produces personal growth in both abilities and income with accountability and with goal setting to continuously improve – so they don’t want to leave,” he said.
And while Millennials may present special challenges as customers, Lawson said they also present special challenges when they’re applying for sales positions because they often have multiple tattoos and piercings.
“There are so many people who have piercings through their face, and tattoos all over the place,” she said. “There’s totally nothing wrong with it, but we try to … have a little more wholesome look. We’re a family-owned business and we try to maintain a family environment.”