Tips for stores: Dump dogs, fix inventory now
Jerry Epperson -- Furniture Today, May 7, 2007
I'm not an alarmist, but I am exceedingly concerned about our industry. According to the numbers, our economy continues to grow at a sluggish pace, but we are hearing some respected economists predicting a recession sometime in the next couple of years.
If we are suffering as an industry today, what would a recession do to us?
There are slight recessions (1980, 1991, 2000) and major recessions (1974, 1982, 2001), not to mention depressions (1929), but we need to get our act together now if we are to survive a downturn from today's sloppy business. Yes, I know we're in our seasonal slow period, but we weren't doing well at the seasonal peaks!
First, be assured you are not alone. The entire industry is suffering from consumer apathy, and is adjusting to a new model. Most recent quarterly sales from Ethan Allen, Stanley, Bassett and Furniture Brands have shown declines of 7%, 10%, 15% and nearly 15%, respectively.
Second, some of our problems are interrelated. For example, excess retail inventories have lead to an inability to make needed changes. After all, if it's in the warehouse, you have to show it on the floor, don't you?
Yes, but if it's been on the floor for a year despite special pricing, spiffs and promotions, it's a dog. You need to give a different look a chance on that prime showroom space. Take the dogs and create a clearance center or tag it, "Make us an offer! No reasonable offer refused." Some consumers love a deal.
Third, recognize that inventory can be replaced cheaper today than for what you paid, so the consumer may be seeing merchandise elsewhere for less. Then there's the redundancy so evident on our retail floors. We've never seen the same looks everywhere at all price points like we have today. No wonder our consumer is bored.
Fourth, remember that if the economy continues to slow, you should focus on cash flow. Our industry's best example of how to make money without big investments in inventory is bedding. Study what you do well there, and apply it to other categories. Even today, bedding sales are rising, although at a slower rate.
We can blame the war, gas prices, weak housing, high consumer debt and many other things, but the truth is that 80% of furniture stores have too much inventory in the wrong products.
Fix it now while you can.
