Just as the core concept of balance is critical in our legal, social and spiritual lives, it is as necessary in managing our retail furniture businesses.
Furniture retailers have responsibilities for assigned tasks ranging from sales and management to purchasing and logistics. Each of these areas can and does dramatically effect the bottom line. So, if you think of yourself as a furniture retailer, please keep in mind that your contribution to corporate success hinges on the talents you bring to your job as a financial manager for your furniture business. It’s a skill that requires balance.
a Balanced approach
Many retail managers have a single minded focus on the P& L Statement. A more enlightened approach, I believe, is to practice financial balance, a consideration that will allow you to maximize sales in the competitive world of furniture retailing, maintaining revenues without the adverse impact of modifying margins and profits, vendor and customer relations, the quality and consistency of service, the ability to manage inventories, or cash flow.
Granted, good managers stress sales growth, but the most successful take a balanced approach to managing all areas of administrative, operational and financial performance. They make sure that there is no exclusivity or independence in the collective cooperation of retail departments.
Further, a focus on sales shouldn’t be so dominated by tunnel-vision that managers lose sight of the fact that unless associates, vendors and customers benefit, challenges will manifest.
In planning for the second half of 2013, therefore, rather than just asking yourself what sales goals should be set, a more meaningful approach will be to use current numbers as a baseline and put systems in place that advance continuous improvement, keeping in mind additional practical considerations such as the ten items listed below.
Ten areas to consider when seeking to apply “focused management and balanced performance” are:
- Advance sales volume by adjusting price points that reflect inflation and vendor increases before replacing similar items in inventory.
- Advance sales without reducing margins or increasing discounts.
- Advance sales while maintaining a consistent ratio of promotional expenses in relation to volume.
- Advance sales while improving inventory turns.
- Advance sales while reducing write-offs in receivables and returns.
- Advance sales and maintain experienced employees who know the industry and competition while maintaining direct labor and sales costs.
- Advance sales without reducing cash flow and increasing indebtedness.
- Advance sales without sacrificing quality of products and services.
- Advance sales while eliminating slow moving, time sensitive and outdated inventory.
- Advance sales with controlled but competitive terms of sales to protect cash flow.
Keeping these ten considerations in mind can help you set reasonable and achievable sales goals that will not compromise your business as a whole. This can also facilitate improvement in other areas of performance leading to a profound and ongoing positive impact on profits.
Due to the avalanche of low priced goods resulting in volatile competition, a middle class with less disposable income, and constrained consumer confidence, furniture retailers must be cautious to not use undisciplined discounting, a practice that can have negative consequences.
I recently came upon such a situation while visiting a store with national name brand recognition. During my two visits to this store, sales personnel offered discounts of 40, 25 and 10%. Needless to say, this created a negative impression, bringing into question the validity of the store’s suggested retail price points across all of their SKUs.
Our retail world is full of examples of companies like this one that conduct continuous sales and further discount at the point of sale. Instead, savvy retailers might consider generating profits by investing in the continuous improvement of their people, in their product mix, in their marketing and supply chains.
Balance in 2013
Discounting to achieve growth in unit sales may be a “new normal”, but continuing to address solutions to solvency through discounting rather than managing all aspects of finances in a balanced way can be a fast track to its opposite.
For many retailers there may, therefore, be merit in moderating sales expectations. That principle may not be well received by some high-energy entrepreneurs, but maintaining smaller, well managed enterprises may lead to greater returns on invested time and capitol for some.
Such a focus on incremental sales improvement can help independent retailers to focus on building personal relationships at all levels including employee associates, vendors and customers. As repeat sales increase, cost of sales decline and margins increase. Considering balance can free up time to focus on using information and programs offered by the many good collective buying groups in our industry. It can be an opportunity for retailers to consider differentiating brand message to include sourcing from vendors in close proximity as a point of differentiation and to build local brand recognition.
Is managing with balance easy? No. Is managing with balance necessary? Yes.
Manage aggressively, but manage with “balance” and the “scales of positive response” will continue to tilt in your favor during 2013.
Ray Morefield has been affiliated with leading corporations in the housewares, hardware and coatings industries. He has also served other industries in an advisory capacity through Common Goals, Inc. Questions or comments can be sent to him by emailing firstname.lastname@example.org.
Read other articles by Ray Morefield