How buying hot deals can hurt bottom lines
Retail Ideas column
Loreen Epp -- Furniture Today, June 27, 2005
Tell me if you see anything wrong with this picture. Not long ago, an experienced furniture buyer purchased a matching bedroom and dining room from the same vendor, although the bedroom was coming out of one factory in Asia, the dining room from another.
He got a great deal and saw nothing wrong with the situation, such as potential finish matching problems, the inefficiency of shipping full containers of each to his many smaller warehouses, or even the need to challenge the vendor to combine both in one container. I believe his approach reveals a serious disconnect between what the buyer thought customers might like to buy, and how well he likely would deliver it to them.For years, we’ve reasoned that our toughest issues are on the back end — inventory, delivery, having the right inventory, and so on. But we’re not doing much on the front end to make that any easier. Why don’t buyers (and sellers) recognize their responsibility to create back-end efficiencies rather than merely relying on the warehouse to be efficient. Won’t this continue to erode profits?Has product strategy, including the right mix, step-up opportunities and consumer benefits, been replaced by finding the deal of the century? With buyers shopping more and more showrooms at more and more markets, has it become one big free-for-all, with a low price the only customer benefit we can come up with? Has vendor strategy, including synergies of scale, freight, volume and partnership, been replaced by finding the latest new vendor who will sell it cheaper? At a time when many successful retailers are reducing the number of vendors or becoming vertically integrated, why do so many merchants apparently believe that survival is much more likely if they’re loyal to no one?Finally, has selling strategy, including consumer benefits, product information, service and reliability, been replaced by a store full of hot deals? Are we content merely to sell less-expensive furniture, when we should be marketing easier home improvement, style, convenience and many other consumer benefits?Passing up the lowest price is hard, and some hot deals on our floor certainly can generate traffic. But the furniture business today is a complex puzzle where all the pieces need to fit together. Merchandising is about so much more than ferreting out hot deals, or dropping products so often it’s disruptive to business.More than ever, buyers need to understand how profits, not just sales, happen; to purchase products responsibly, with freight, packaging, service, terms and ordering efficiencies as important as low price; to know before a market what products they need; and to examine every back-end problem to see if it was caused by a front-end decision.Great products and savvy merchants are what today’s successful retailers have in common. But while their front-end buying is key to their consumer appeal, it’s their integration with the back end that will reap profits.
Do you agree?
