Turning inventory, with a vengeance
By Carole Sloan -- Furniture Today, December 9, 2001
It's interesting that the two stories ran side by side.
They were on totally different subjects, but the stories on page 2 in last week's Furniture/Today, about the death of Kevin Koenig of City Furniture and the acquisition of former HomeLife stores by Havertys, each touched on a point that is becoming increasingly important in furnitureland.
The point is the importance of the back end of the furniture business, an unglamorous subject but the key to survival and prosperity, especially in challenging times.
Both City Furniture and Havertys, along with a growing number of others, are investing corporate dollars in back-room expansion and updating. This is important, although it's nothing like the latest from the all-time wizard of retailing logistics — Wal-Mart.
If the world's No. 1 retailer ever decides to get really serious about furniture, here's just one element in how they'd expect their furniture suppliers to perform.
The giant discounter, as nearly everyone knows, has stringent standards of inventory. At present, the ratio of inventory to accounts payable is 65%. This means that 65% of inventory has been sold before Wal-Mart has to pay for the goods.
The goal, as Wal-Mart stated last month, is 100%.
And Wal-Mart is not the only big gorilla emphasizing inventory controls and turns. Kmart, another major player in furniture, has raised its inventory to accounts payable ratio from 32% to 38%, with a goal of 40% by year's end.
The actions of these two players are bound to have more than a ripple effect on competitors — and sooner rather than later — as everyone in the retailing community jumps on board in the drive to become more efficient, and therefore more profitable. It certainly will affect furniture, since both Wal-Mart and Kmart sell a good deal of it.
Folks in furnitureland should take a look at what's going on at other retailers.
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Contemporary Specialist DeBoer's to Close
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Baer's to buy Carls store
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