It was the ideal promotional furniture retail concept! I had just joined an established chain of stores in Kansas City, MO that wanted to open up a clearance center. The pricing program was designed to be easy to understand. Every item was tagged with a plain manila hangtag with a SKU on the back and handwritten price on the front. Outlet pricing was simple, 50% off the tagged price.
Promoted as “The Discount That Everyone Understands - See The Price And Take 50% off!”, the store was crowded on opening day with each item displaying a neatly written $199, $299, $399 and up. But there was a fatal flaw that became apparent from the first shopper who landed on a $399 sofa. “How much is this?” she asked. The reply was our rehearsed line, “It’s $399 but you can have 50% off!” the salesman gleefully responded. The shopper followed, “I know that, but how much is it?” Our man quickly did the math - “$199.50”. Realization set in that the calculations were just too difficult for our shoppers.
Within a few days the entire store was retagged. $199 became $200, $299 became $300; everything was retagged to end in “00”. NOW we were ready. But history soon repeated itself. We had to calculate selling prices for $300 recliners, and $700 bedroom sets. People liked the idea of 50% off; they just didn’t know what it meant. Finally, tagging included the regular prices that were X’ed out with the sale price underneath. All at 50% off. As you may have figured, shoppers who saw this still wanted to know, “You can do better, can’t you!”
That was two decades ago, and I still see retail stores using percent-off discounts, and shoppers still not understanding the impact of 50% off or 70% off. However, there is a concept in discount pricing that has a definite impact and is easy to communicate. It’s Dollar Discounts-simply stated as “Take $100 Off”.
On a recent competitive shopping trip I visited a store celebrating its 17th Anniversary in business. Kudos to them, but their Anniversary Sale Promotion was 17% off everything in the store. I spotted a queen mattress set tagged at $1088 with a “Take 17% Off” overlay tag. Great idea, but how many shoppers can do that math, or would bother to use the calculator app on their smartphone? Some retailers view this as a positive, as they believe it encourages (or forces) the shopper to engage a retail sales associate (RSA). When I located an RSA and asked the price, she disappeared for 4½ minutes looking for a calculator. Even then she had trouble getting the price correct.
Next time you are tempted to promote percent discounts, try dollar discounts instead. They can take several forms; instant rebates, coupons, hang tags, or In-store flyers. Use your percent off model, but state it in dollar form. 10% off becomes $50 off any item priced $499-899, $100 off any item $999-1499, and $150 off any item $1500-1999. This is not only easy to understand, but will also result in a 7-8% reduction instead of the 10% you thought you had to give away.
Sales Goals & Percent
Using percent can have another negative effect in your business. Successful retailers become successful by coaching Key Performance Metrics (KPM) for their sales staff. The idea is to set minimum standards and goals to obtain well-rounded sales performance. Closing is generally measured by Percent. However, there is an error in coaching all sales performance this way. Imagine you are setting monthly sales goals for your RSAs. You start with a written goal, say $50,000. Then you look at certain profit center categories for production. This should include Extended Service Plan, Bedding, and Accessories. Typical retail goals are stated as $50,000 written, 5% Extended Service Plan, 15% Bedding, and 5% Accessory Sales. These are great goals, but expressing them in percent leaves a gap regarding how to achieve the category sales numbers. If our shoppers can’t figure out 50% off of a $400 sofa, can our RSAs understand that 15% of $50,000 has to be in Bedding? And, like a regressive tax, the Bedding, Service and Accessory sales figures change with every day’s written business.
For example, if your RSA has 15% in Bedding Sales on the last day of the month, and sells a $10,000 Dining Room, her 15% achievement has dropped. Even if she is skilled enough to add a $1,299 Mattress set to that $10,000 Dining Room, normally a good thing, her bedding percent achievement still drops below 15%.
Next month try stating goals as Dollar figures only - no percents; no moving numbers. $50,000 Written now becomes $50,000 with $2500 in Extended Service, $7500 in Bedding, and $2500 in Accessories. Your managers will find it easier to explain at the start of the month and easier to coach during the month. The reason is that the category sales goals NEVER change, no matter what sales volume the RSA sells in a month. The $7,500 Mattress Goal remains at that amount, whether she writes $40,000 or $99,000 or more. You can even help your RSA understand that $7,500 in mattresses is fifteen $499 promo sets, nine mid-priced sets, or three premium sets. And-your “un-coachable” RSA will enjoy hearing “Once you hit $7,500, I won’t mention mattresses to you for the rest of the month!” If you set realistic sales volume goals you WILL reach your store category goals.
On the 28th day of the month it’s far easier to coach your RSA by saying “When you sell one more $799 mattress, you’ve achieved your goal” than “You are at 14.2% in Bedding, and need to be at $15%... Go Get ‘em tiger!” If you are like me and love to post performance results in the break room, you’ll like graphing every dollar sold, instead of trying to post percentage increases and decreases.
Store Owners can set Store Managers’ goals the same way, in dollars for all volume and category goals. Once their store hits the monetary goal, they can concentrate on sale volume and build your business even greater! And, in the end, wouldn’t you prefer $40,000 in bedding sales and $12,500 in Extended Service and Accessory sales on $300,000 store volume to 15%, 5% and 5% on store volume of $200,000? I’ll wait 4½ minutes while you get your calculator!
Gordon Hecht: Gordon Hecht is a 39 year veteran of the Home Furnishing business starting as a Delivery Helper in Las Vegas, NV. Following a successful sales, store management, and multi-store management career he joined Ashley Furniture Industries. In his role as National Director of Sales for Ashley Sleep Gordon helps Retailers improve Bedding Sales through training, merchandising and display.
If you can’t add percentages in your head and need a deal on a used slide rule or abacus, contact Gordon at Ghecht@ashleyfurniture.com