Research Says

Judi Fulbright blog photo

Taking the measure of furniture stores

June 4, 2009

How do you determine when your furniture store is truly operating at an optimum level? There are the obvious bottom line figures from profit-and-loss statements that can be reviewed as often as monthly. And there are other measures that can be used as powerful tools for guidance towards a successful store’s operation.

Stock turns, a key indicator of a store’s overall sales picture, are crucial. When inventory turns drop, it’s reflected in a store’s profit. While stock turns can vary by product category, stores’ often use inventory turns based on average inventory and costs of goods sold to provide an overall perspective. Reporting on just such figures for furniture stores’ inventory turns, the 2008 Furniture Store Performance Report found median stock turns for 2007 were 2.6 times. How does your store compare with this figure?

Another critical indicator is the close ratio. It requires that store operators know for an average week how many customers visited the store, and how many made a purchase. In the 2008 Furniture Store Performance Report, the close ratio for 2007 was 32%. Is your own store’s close ratio comparable to that of your peers?

Tracking 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 will help a retailer know to the dollar what sells the best in their market. Knowing the percentage of their total sales in any given category at their best-selling price point will help a retailer efficiently plan inventory. Dollars tied up in slow-moving inventory and floors crowded with an over-abundance of choices hurt the bottom line. How well is your store doing at tracking this data? Do you have the hardware and software needed to give you this ability?

Then there’s advertising. Retailers spend a significant amount of dollars to entice customers into their store. How do they identify the people who are ready to buy? Is their advertising on target? Is the timing of the advertising campaign on target? For about the last decade, retailers have been spending about 5% of their annual revenues on advertising and promotions according to results from annual Furniture Store Performance Reports. Have the current economic conditions caused your store to cut back or beef up this key area?

Right now, Furniture/Today’s annual Furniture Store Performance Report, assessing furniture stores’ operation for 2008, is in the field. If you’ve received one of the forms mailed out a few weeks ago, please take a few minutes to answer as many of the questions as you can. If you did not receive a questionnaire form and would like to participate in this year’s effort, please contact me at I’ll be delighted to fax or e-mail you a form.

To respond online to The Furniture Store Performance Report survey, click here.

Our intent is for you to use the information in this upcoming report to target areas where you can improve your store’s performance, and of course, its profitability.