A peek inside furniture store operations
Many changes have occurred with the economy, consumers and retail operations over the last year. Furniture/Today, takes a look inside furniture store operations in its latest Furniture Store Performance Report survey, presented in this week's print issue, to give the industry an idea of how things are progressing and what opportunities remain ahead.
What did we find? Overall, furniture retailers are working hard to stay at or above water. With consumers' altered shopping habits, furniture stores are staying open a little longer to try to reach all potential customers. The result: sales per sales employee grew more than 10% over the year.
Merchandise sales accounted for the largest chunk of revenues last year while finance and credit income grabbed the next largest share of revenues-though a distant second.
The credit CARD reform act, effective in February of this year, had a great affect on furniture retailers over the one year time-period. Meant to help consumers, the CARD reform act had many retailers working to change and implement new advertising strategies to appeal to their customers without breaking the new rules. However, whether it is via "no-no-no" advertising or traditional financing advertising, deferred financing is a trend that will continue.
Lastly, the Internet has become an advertising vehicle for many furniture retailers. In particular, 32% and 19%, respectively, of furniture stores are engaged in Facebook and Twitter social media sites. These types of social media allow retailers to reach customers on a more intimate level and in turn provide their customers more information about their store and store's web site. And this has, no doubt, given furniture stores a new avenue for customers to drive and hopefully shop.
Below are key efficiency measures for furniture retailers. Take a look and see how your store measures up.
|
Efficiency measures |
|
|
Medians |
|
|
Gross margin percentage |
47% |
|
Return on sales |
4% |
|
Stock turns |
3.2x |
|
Close ratio |
35% |
|
Number of customers
visiting store in average week |
125 |
|
Purchasers per sales
employees per week |
7 |
|
Size of average
transaction |
$875 |
|
Total number of hours
store is open per week |
56 hrs. |
|
Sales per sales employee |
$575,000 |
|
Percentage of gross
square footage devoted to selling space |
66% |
|
Average square feet of
selling space |
25,000 sq. ft. |
|
Sales per square foot of
selling space |
$160 |
Source: Furniture/Today's Furniture Store Performance Report, 2010
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Dave@traxsales.com commented:
We work with over 3000 furniture stores around the country and I can absolutely prove that the average closing ratio is not 35% as you state, but is 12.4% and I can also prove that the typical below average salesperson has a closing ratio of 9% but if you can help them bringthe same cusotmer backon the same item the closing ratio goes over 80% and furthermore 95% of all furniture salespeople do almost zero follow-up. They are looking for the be back bus, every day.
Dave@traxsales.com commented:
We work with over 3000 furniture stores around the country and I can absolutely prove that the average closing ratio is not 35% as you state, but is 12.4% and I can also prove that the typical below average salesperson has a closing ratio of 9% but if you can help them bringthe same cusotmer backon the same item the closing ratio goes over 80% and furthermore 95% of all furniture salespeople do almost zero follow-up. They are looking for the be back bus, every day.
Chuck Tanner Wholesale Interiors commented:
There's an average $1.50 per square foot per year for the retail floor cost. That is really too low, average has to be somewhere between $6 and $20 per square foot.
Greatness commented:
Daphne,
Would you please explain to me on how to read your research report? Also your national closing ratio average is at 35%? Where did you get this number and which furniture store are supplying the data for those numbers?
Robert Mark commented:
Very interesting, Daphne. Might you be able to explain why 2010 presented the highest gross margin? One might think the opposite in trying times like these. Please analyze further for us to learn something. I also wonder what made 2001 have the highest % return on sales with a 42% gross margin. What do we have to learn from these research figures? Thank you.
Daphne Garland-McLean commented:
Hi Robert, thanks for your comments. I've gathered some information on gross margin percentage and return on sales for the last few years so that you may see how this year's figures compare with previous years. While not all encompassing of each efficiency measure, hopefully, this will provide a quick comparison.
Report year Gross Margin % Return on Sales
2010 47% 4%
2009 45% 3%
2008 44% 2%
2007 44% 4%
2006 43% 3%
2005 43% 2%
2004 43% 3%
2003 42% 3%
2002 43% 4%
2001 42% 6%
2000 42% 3%
Big M commented:
A 35% close ratio is a little hard to beleive if they are counting all traffic. Most will tell you if they get a TRUE 20% that is really good. I would love to see a statistic of the last three years comparison of approval rates for financing customers, it has changed drastically and is harder than ever to get people approved.
Big M commented:
A 35% close ratio is a little hard to beleive if they are counting all traffic. Most will tell you if they get a TRUE 20% that is really good. I would love to see a statistic of the last three years comparison of approval rates for financing customers, it has changed drastically and is harder than ever to get people approved.
Robert Mark commented:
This would be much more meaningful if you showed how these figures compared with each of the previous 10 years. Average square feet of selling space may be skewed by the demise of so many smaller independents and the rise of big box stores. Sales per square foot still are abysmally low overall for such high overhead.
