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Advance Planning For 2018

Furniture World Magazine
Volume 147 NO.5 September/October


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I know it’s a little early, but these months seem to fly by.

Sure, your business ship is afloat and on course, but now is the best time to plan for 2018. Chances are really good that you will not have time this week to plan for next year. And there are two chances, slim and fat, that next week looks any better! Just don’t wait until you are taking tinsel off of the Christmas Tree to start the process!

Planning takes a lot of GUESSING! We really don’t know what next year, or even what next week will bring. Planning starts with putting two circles around the number 2018. The first is The Circle of Concern. This encompasses everything you have absolutely no control over including interest rates, the economy, housing starts, new competition entering the market, current competition running one of those whiz-bang GOB sales, losing your top salesperson, hurricanes. You know things that keep you up at night!

The other circle is the Circle of Influence. These include actions that you have full or almost full control over. Think about your advertising budget, buying new equipment, hiring new people, moving out poor performing merchandise and employees, getting a better location or painting the current one. You also have control over setting operational standards, sales standards, training programs, relations and requirements with your vendors, retail pricing strategies, charitable donations, finance promotions, floor displays, and succession planning.

Your business is a lot of things to a lot of people. You are a delivery/installation company, a health insurance provider (in the U.S.), a paycheck to some people, and a community member. But, primarily, you are a sales organization. Therefore, start your planning with a sales budget because that is where you derive income to pay for all that other pesky stuff like wages, taxes, and rent.

 

Budgeting

Unless you are consolidating locations, plan for a sales volume increase over 2017. At this point you can figure what the rest of the year will look like, or you can use Q4 2016 for direction. That will cover increases in the cost of living, which I understand is going up $2 a 12-pack next year. You can use industry forecasts of about 4.5 percent for Home Furnishings, or get aggressive and go for double digits.
Next, budget that out over a 12 month calendar. Luckily our industry is fairly stable month to month. Your area may differ, so look at July 1, 2016 to June 30, 2017 to figure what percent of business you do each month.

 

Advertising

Now that you've determined your rate of monthly business, you can plan your advertising spend. The Furniture Business is COMPETITIVE! Plan to spend money to bring people into your store. Your net spend should be around 10 percent MINIMUM after any rebates or co-op advertising funds if you want to get your voice heard. There isn't an easy answer to the question of where you should invest your advertising funds. Every market is different. However, it’s hard to get beat by the BIG GUYS on digital and social media advertising. They can outspend you on TV and ROP, but you can appeal to your local market better on that world wide webby thing. BTW, you don’t have to be an expert. You can hire services to do it all for you.

 

Sales Goals

Once you set your goal and determined the best road to get there, it’s time to engage your sales team. Look at your monthly and annual sales goal. Divide that by the number of RSA you have selling for you. Give a half point to any part-timers. For a five million dollar store with six full-time and two part-time RSAs it comes out to $715 thousand a year, about $60,000 a month. Part-timers are half of that, so click the calculator on your smart phone and you’ll have the answer.

Get real and honest. Is your number per RSA too much, too small, or just right? Understand that our industry has a 50 percent turnover rate, and you will lose some non-family members in 2018. Decide if you need to hire more people, or people with different skills.

 



 

Gross Margin Goals

The next step is, as we said in the ‘80s, totally GROSS! It’s setting your gross margin goal. You can decide on a QUEEN or KING sized margin and focus on getting the most money out of every sale. That doesn’t always mean raising prices. Adding room essentials like tables, lamps, rugs and wall art or sleep essentials (the 3 PPPs) of protection, pillows, and power bases will naturally raise your margin.
Alternatively you can be the King or Queen of Cheap! Stay within pricing guidelines, but set a goal that you will never be undersold. That’s OK, but experience tells us that there are no winners in the race to ZERO! Your better bet is to promote and sell a mix of goods while not stepping over dollars to pick up pennies.

 

Costs

Your planning is almost complete! You have your sales goal, gross margin and advertising spend. Your shoppers and some employees believe that you get to keep the rest. Your landlord, insurance company, utilities, and other people in your posse like landscapers, vehicle repair people, and Uncle Sam think otherwise. Start deducting your cost of doing business and taxes. Whatever is left after paying off the world is yours to keep!

The number should be BLACK which means you made money that can be used to reinvest, expand, or just have fun. If the number is RED then your friendly local banker makes money. You can avoid this by reducing unnecessary expenses, under-performing assets like outdated inventory, or under-performing associates. An easy rule is, if it doesn’t add value, eliminate it.

If this seems to be a lot of work to you, then you are right! But you don’t have to go it alone. Best in class factory reps or your accountant can guide you through the process and planning. You can let me know how I can help. And please don’t wait until December 24th! I might be busy that day!

 

Looking Backwards To Be Like Amazon

While you are budgeting and looking to the future to compete with the Amazons and Wayfairs of this world, you might also take a look backwards.

I started my retail career in the 1970s, an opportunity to be mentored by salespeople who started their careers in the '50s. Back then selling WAS a career, not just a job you took until you got a real job. I worked with guys named Mel, Ben, Ron, Len, Bud, and Jay. It seems you had to have a name with three letters to be a true salesman back then. Here is what they all had in common with each other and with Amazon.

They Looked Their Best: Every salesman (they were called that back then) I worked with invested in their wardrobe and personal appearance. Their shoes were shined and their ties, suits, and hairstyles were up to date. Some even wore diamond pinky rings to show their success. Amazon and Wayfair also continually work to make their websites more attractive to shoppers.

They Knew Their Customers: Back in the day, successful salesmen reached out a hand to greet shoppers, memorized their shopper’s name, and used it often. They welcomed back returning customers and already had an idea of what they might like. They asked each customer to recommend their store and products to a friend. They even joined animal groups like the Lions Club or the Elks Club to create social connections that would lead to more sales. Amazon also knows my name and greets me when I log in. They already have an idea of the items, styles, and sizes of products I want. Every once in a while they will send me a note to remind me I haven’t visited in a while or check if I am running out of a replaceable product. Amazon also asks me to rate products and occasionally sends me another shopper’s question to see if I can answer it.

They Knew Their Competition: Have you ever heard a shopper say “This is the first place I looked” or “I want to shop a few more stores”. The latter is less heard these days, however, people want to shop around when they don’t believe you have the perfect product or the perfect price. Salesmen working in the middle of the last century couldn’t just go online like we can to find out what other stores were offering, so they took time during their lunch hour to find out! And when shoppers inquired about other retailers, the salesmen could recite what products were out there, including pricing, service and options so shoppers wouldn’t have to go down the street. Amazon doesn’t want you leaving their site, either. They will give you the PRIME price and then show other lower prices from their site and other distributors. They’ll also show the condition of products from those distributors along with shipping charges and delivery times.

They Asked for the Sale: Jay, Bud and the rest of them taught me the ABCs of Selling. It means Always Be Closing. In their day, it was a sin to let a shopper out without asking for an order. Amazon does the same. Their "Add to Cart" icon even assumes that the quantity will be greater than one! Old School Salesmen also know that the best time to sell somebody something is when they are buying, so they always introduced one more product. Amazon is pretty shrewd too! Choose any item and they will show you different bundles to help you enjoy your product more. We used to call it “One Stop Shopping”, now it’s “One Click Buying”.

They Always Said Thank You: Back when postage was a nickel and you didn’t need zip codes, salesmen sent out hand written and addressed thank you cards. Part of the verbiage included the customer’s name, the product they bought, some business cards, and an invitation to come back to the store. Often, if there was a bump in the road between purchase and delivery it was up to the sales associate to call the customer to let them know. Amazon also sends you a "Thank You" email mere seconds after you place your order, whether the item is $10 or $10,500. In that email you’ll get a delivery date, and in the rare instance that Amazon can’t make that date, you’ll get updated information. Although it’s automated, it’s always cool to get that email from Amazon telling you that your items have shipped.

 

Conclusion

Retail store owners and managers have a lot of reasons to stay awake at night. It’s a good idea to plan for the future with shrewed budgeting plus adding cutting-edge innovation to drive traffic and sales. And, while you’re driving forward, take a peek in the rear-view mirror so you don't lose track of those timely tactics to attract business and create customers for life.

Gordon Hecht is Senior Manager-In Store Concepts for Serta Simmons Bedding Company, introducing and expanding bedding business in conventional and non-traditional venues. He started his 30+ years experience in the Home Furnishings industry in Las Vegas, NV as a delivery helper and driver and later served in sales, retail management and consulting roles.
Read other articles by Gordon Hecht