• Clint Engel

‘A different culture’

Badcock’s new dealer model fuels store openings

BadcockBadcock employees and executives gather for the ribbon cutting in Port Orange, Fla., the first dealer-owned store built from the ground up in several years.
MULBERRY, Fla. — For the past few years, sales and same-store sales for Badcock & more Home Furniture have made it a top performer among the Top 100. But its store count has inched up only by a few stores each year as new openings were largely offset by dealer attrition.

That second statistic is changing for the better.

The Mulberry, Fla.-based retailer now is surpassing an internal goal of opening a net 10 new stores each fiscal year, and a big driver for the shift is a new dealer model that relieves store owners of the credit-granting and collecting side of the business and allows them to focus on selling.

Badcock’s fiscal year ends June 30, and by then it expects to have opened a net 14 stores for the year for a total of 333 Southeastern showrooms, said Rob Burnette, president of the furniture, electronics and appliance chain of corporate and dealer-owned stores. He said most new stores are within the retailer’s current geographic footprint, although two openings in Knoxville, Tenn., represent a new market.

Most of the openings through the end of June also are corporate-owned locations, with the exception of the new Port Orange, Fla., store opened earlier this month and new locations getting ready to open in Wetumpka, Ala., and Clinton, N.C. But that ratio is shifting, too. Next fiscal year, Badcock plans to open 17 to 20 new stores — 10 corporate and seven to 10 dealer showrooms.

“When we’ve closed stores, it’s usually because a dealer is going out of business,” Burnette said. “But with this new energy, we’re not losing stores. With the new sales-based dealer model, I can’t imagine there would be a store closing without some dealers wanting to swoop in there and buy it. It’s a different culture for us now.”

The retailer began testing the new model at a dealer store in Jacksonville, Fla., last summer. The model changed the way the dealer gets paid. Credit sales account for roughly three-quarters of the retailers business, and the new model centralizes the credit granting and collecting to the Badcock corporation and improves the dealer’s cash flow as Badcock pays dealers up front at the time of the sale. The marketing, systems, the consigned inventory and other services remain intact.

Burnette said dealers operating under the established model have a tendency to grant credit to consumers based on what their cash flow needs or wants are at the time. If a customer, for instance, is buying a $1,200 sofa on credit, the dealer may conservatively request a $200 monthly payment for six months, to get that cash on the books quickly.

Badcock, on the other hand, might take a less conservative approach and ask the customer for $100 a month for 12 months, providing “a little better cash flow for the customer,” Burnette said, and ultimately benefiting the retailer’s sales by making it easier for consumers to buy.

The Jacksonville dealer that first tested the new model saw huge sales gains out of the gate, but enthusiasm for the program was initially tempered, Burnett said, because other Badcock dealers knew the Jacksonville owner historically was very conservative in granting credit.

Badcock’s next test was with a dealer known for being more aggressive with credit granting. As double-digit sales gains started rolling in from his stores, too, other dealers took notice.

BrandonBrandon Smith, left, dealer owner of the new Port Orange, Fla., showroom, with Badcock & more Home Furniture executives Mitchell Stiles, vice president of dealer operations, and Rob Burnette, president.
Today, 28 of Badcock’s 225 dealer stores have shifted to the sales-based model (the 105 corporate stores have had centralize credit for several years now), with that number increasing to 75 by October this year. And even as overall business has flattened a bit, Burnette said stores under the sale-based model continue to outperform with double-digit sales increases.

Initially, Badcock designed the new model as more of a way to attract new dealers by offering that immediate cash flow and removing the credit headaches. There was no pressure on existing stores to convert, but the dealer interest has been so strong that Badcock’s attention has turned primarily to that existing dealer base and entrepreneur-minded managers.

“It’s really exceeded our expectations,” Burnette said. Badcock, he said, will be smart and measured in rolling out the change since it has cash flow implications for the corporation, too, now that it’s paying dealers more out front.

“They’re lining up and clamoring to get in,” he said. “We’re being upfront, letting them know we’ll get to them as quick as we can.

“They can move themselves up the list by buying a corporate store or opening a new store,” and that’s led to the invigorated expansion activity, he said.

Badcock still wants to pursue new dealers and to discuss store conversion opportunities with independent retailers. It will consider any new dealer opportunities that come its way, but that’s not the priority right now.

“We think we will have a great opportunity for new dealers, but we want to have a documented track record with the new model before we actively seek additional dealers,” Burnette said.

“We continue to offer free floor planning, free advertising support and no franchise fee. We are confident it will be the best opportunity for someone wanting to own his own store with limited startup capital.”

Burnette was named president of Badcock on Jan. 1, taking the reins from Mike Price, and the new dealer model is just one of a several initiatives he has been shepherding at the more than 100-year-old chain.

Another initiative is the retailer’s return to e-commerce. Right now, Badcock customers can apply for credit online and shop the product assortment, but they must visit a store to consummate the deal. Badcock tried e-commerce but ran into a debate with dealers over how they would be compensated for online transactions.

“We took a number of years off, and now we’re coming back to it,” Burnette said. “The dealers now support it, and the timing is right.” The company expects to relaunch e-commerce by next spring with a goal of doing about $2 million in online sales by the end of 2018, he said.

Badcock also has updated and increased its communications with its dealer base and store managers. The new stores also are undergoing changes as the retailer tests new elements.

In Port Orange, for instance, the 18,000-square-foot store owned by third-generation dealer Brandon Smith features polished concrete floors and updated graphics including historic black-and-white photos. The store is the first dealer-owned store built from the ground up in several years.

Burnette said Badcock is preparing for growth on the back-end as well. Distribution center expansions are on the drawing board for its facilities in Mebane, N.C., and Mulberry, Fla., “and two years after that, we will be looking to build another.”

Badcock is No. 23 on Furniture Today’s Top 100 with estimated furniture, bedding and accessory sales of $420.1 million in its fiscal year ended June 30, 2016, up 14.5% from the year before.

Clint EngelClint Engel | Senior Retail Editor, Furniture Today
cengel@furnituretoday.com

Please feel free to email or call me with all of your retail news and tips, including expansion news, successful merchandising and marketing strategies and anything else you would like to see covered by Furniture/Today.  Contact me directly at cengel@furnituretoday.com or 336-605-1129.

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