Insights on how to use this issue

Staff Staff, September 10, 2009

Furniture/Today's exclusive Furniture Store Performance report is designed to give retailers benchmarks as they assess operations and compare results with others in the industry.

Karen Haver, the CPA who works with Furniture/Today on the project, has identified some of the key items to look for as you review the report.

Pay particular attention, she said, to the best-selling price point, the number of SKUs on the floor at the best-selling price point, and the percentage of sales at the best-selling price point.

"These are data you should be keeping at your store. Some retailers taking the survey give us a range for best-selling price point," said Haver. "This tells me that they don't really know to the dollar what sells the best in their market. This, along with how many SKUs they have on the floor at the best-selling price point, is precisely the merchandise they should be tracking.

"Retailers who don't know what percentage of their total sales in any given category is at their best-selling price point can't efficiently plan their inventory and may be carrying too many lines," she continued. "If your computer system can't track this type of information, you need to upgrade!

"Knowing what lines sell the best and how much of your sales are generated from those particular SKUs helps your buyers be more efficient and effective, allows you to provide exactly what the majority of your customers are looking for, and can increase your profit margin by reducing the number of slow-selling lines you carry."

Similarly, said Haver, "retailers should look at what others are doing regarding the number of total SKUs on the floor and the number of lines carried. The most profitable retailers limit their SKUs and lines based on their in-depth knowledge of what their customers want to buy. Money isn't tied up in slow-moving inventory and floors aren't crowded with an over-abundance of choices."

Another critical item is stock turns, a key indicator of your overall sales picture.

"If your inventory turns drop, you probably aren't having as profitable a period," Haver said. "You may have a drop in sales, or your inventory is becoming obsolete. You should analyze where your company stands in relation to industry averages and then determine if the variance is normal for your business."

Another critical indicator is the close ratio. It requires that you know in an average week how many customers visited your store, and how many made a purchase.

"A high-end store may not see as much traffic or have a lower percentage of people who buy compared to low-end and midpriced retailers, but all need to know if their store is doing as well as it could be," said Haver. "What were last year's numbers and how do they compare to the current year? Is there a particular event that may explain an unusual drop or increase?"

Then there's advertising.

"Retailers spend significant advertising dollars to entice customers to their store," she said. "Are you truly targeting the people who are ready to buy something? Is the timing of your advertising campaign on target? Is your close ratio comparable to that of your peers?"

There are two more things retailers should watch, according to Haver.

First, look at non-merchandise activities. "Retailers are being squeezed between consumers who don't want to pay more and rising product and delivery costs," she said. "They are looking for new ways to add value and service their customers, while enhancing their bottom lines. Non-merchandise services and the percentage of revenues they generate have been increasing.

"Is there a service you could offer to solidify your niche? Are you following the trend of what everyone offers or are you setting the pace with innovative ideas to keep your customers satisfied?"

The second thing is sourcing, which of course involves imports.

"A few years ago, almost no retailers imported directly," Haver said. "Most belonged to buying groups and almost everyone attended at least two trade shows a year. But we've seen retailers shift towards more direct importing, and less use of buying groups among larger retailers.

"If your competitors are importing directly, is there an opportunity for you to lower your costs by following suit? Perhaps you want to play up the angle that your merchandise won't take six to eight weeks to arrive in the store, or that you 'sell American.' "

Furniture/Today hopes retailers will use the information in this report to target areas where they can improve profitability. If there's something you'd like to know that we aren't asking, let us know by calling Kay Anderson at 336-605-1090 or e-mailing

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