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Finding money in the margins

Retail Ideas column

Leslie Carothers -- Furniture Today, May 17, 2007

I was reading a national kitchen magazine this week and saw an ad which featured chairs. Nothing unusual about that. However, it was a Barnes and Noble ad...I was intrigued. The ad showed a beautiful leather chair and the tag line was "Destined To Become a Bestseller."

I read the copy. Barnes and Noble is now in the furniture business in conjunction with Mitchell Gold +Bob Williams. How interesting. I thought Starbucks would be first with this years ago but they obviously passed on the furniture opportunity in favor of music-no doubt much easier to deliver.

Which got me thinking. Our business is definitely a high margin business compared to other consumer goods categories. That's why Target is now so firmly entrenched in "our" space and why other non-furniture related businesses want to hop on to our wagon, too( see previous column re: home builders).

So, where are the high margin opportunities for those of you already in the furniture business? Yes, goods from overseas offer incredible margins, but those margins tend to cost in other ways-less selection, more me-too merchandise which confuses the consumer, customer service issues that are not easy to resolve and inventory carrying costs that can eat away at your profits.

So, what's a retailer to do? Concentrate on accessories. Yes, the soft stuff. I know, it's much easier to move upholstery and case goods, but, are you really moving the larger items right now? Is your consumer constantly visually excited or is she seeing the same items moved around into different locations within your store? Consumers are savvy, readers, they know when a store looks fresh, new and different and they know when they are just seeing the same merchandise repositioned.

Accessories offer you the opportunity to:

1. Make extremely high margins.
2. Give your store a visual face lift almost every day of the week.
3. Get your customers excited through showing them how to do "room makeovers" with just accessories.
4. Keep your sales asssociates excited and motivated by giving them the opportunity to design vignettes that are voted on by the consumer-the vignette that wins the most votes/points etc.nets its designer a wonderful trip/gift certificate, recognition on your website, etc.

It's been my experience that many retail store owners just don't "get" accessories and don't want to devote a lot of time to them. However, this is a mistake. Accessories give your consumers a REASON to come back into your store on a weekly basis-especially as you become known for your fabulous visual display and unique items.

If you don't think this can add significant dollars to your bottom line and generate significant cash flow quickly, ask yourself how often your customers that HAVE purchased just accessories have bargained with you over the price. Maybe a few do, but most don't. They just want to get the perfect pillow to go with their sofa before their guests arrive. And, maybe a nice throw, too. And, come to think of it, they probably need a small accent lamp for the end table and, well, probably a vase for the flowers, too....

And, just in case you STILL aren't convinced..How much margin do you think there is in makeup? Any idea? Do your research. Then ask your wife how often she purchases any kind of makeup during the year compared to a beautiful outfit. When you figure this out, you will understand why famous designers license their names to their own makeup lines.

It's extremely profitable.

Get the picture?

Begin here..

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