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The Pay Raise You Didn’t Know You Wanted

Furniture World Magazine


Ringing the register with incrementally higher sales tickets results in pay raises all the way around.

Whether your economic theory preference leans toward Keynesian or Dickensian policies you can’t help noticing that prices have been going up for the last eight to twelve months. Before that, over the last decade or so, they’ve remained stable and even decreased for technology and energy.

Most of the economics training I received at my alma mater, Sagebrush State University, consisted of discussing the pros and cons of splitting eights at the blackjack table. I don’t pretend to be an expert, but I can give some perspective on the value of rising prices.

Price increases are a hassle and a disruption in your day. You have to re-tag your store and reprice your website.

My home furnishing career started in 1973 as a delivery helper at Jay’s Furniture, Carpet, and Appliances. On a clear day you can see the (former) location from the 16th floor of Las Vegas Furniture Market Building B. The owner promoted a $99 King Size Mattress almost every week. He could do that because gas was 39.9 cents a gallon and I was earning two dollars an hour.

It was an ideal situation for the time. I could eat lunch at Mickey D’s and get change back from my dollar. Entertainment was priced at 89 cents for a six-pack of Schlitz, and $2,200 bought you a decent brand-new car.

Then things changed. Gas doubled in price, a Big Mac shot up to $1.19 and it took about three grand to buy some wheels. That $99 mattress became the $159 special. My boss was generous and boosted starting pay to $2.50 an hour.

Flip forward to 1980. I already earned my sheepskin after attending Tumbleweed Tech for a couple of years and scored a job making about $15,000. My new sports car set me back $8,100 and a brand new three-bedroom home required a 30-year note to pay off $65,900.

I could afford all of that because selling King mattresses generated $499. The invisible hand of Adam Smith (see, I did learn a little about economics)! had guided wages and profits higher, trailing every price increase.

True Then & True Now

Those of us who worked in the very late 1970s and early 1980s should remember very large increases in prices, often 10 percent every four to six months. As a salesperson it became harder to justify value to cost. Luckily my very sage store manager, Louis Landro, explained it all in one sentence. “Every price increase is a pay increase for the salespeople.”

Increasing that $99 King mattress to $159 then to $499 and now $1,599 didn’t cause fewer units to be sold.

It was true then and true now. Price increases are not limited to the products in your store. Costs are increasing for every manufacturer—so the guys and gals in the store down the street or across the country are experiencing the same price jolt as furniture and bedding retailers. And it’s not just our industry. Costs for food, fuel, technology, housing (big time), building materials and more are rising. You know it and your shopper knows it too.

Yes, You Need to Re-tag

Price increases are a hassle and a disruption in your day. You have to re-tag your store and reprice your website. So does everyone else. But that change in tag means another $25-$100 at the register with every sale. You can’t even argue that price increases mean fewer sales. Increasing that $99 King mattress to $159 then to $499 and now $1,599 didn’t cause fewer units to be sold, because our bedding products always remain good marketplace values.

What it Really Means

Price increases mean that your sales team can sell the same number of units and get paid more money. Price increases also mean that the percent of sales dollars devoted to covering occupancy and operational costs will most likely decrease, generating better net profits.

Nobody likes to pay more for the same thing. It’s one of those facts of life that are in our sphere of concern and outside our sphere of control. It’s up to you whether to look on the darker side (the world that’s in turmoil) or the lighter side.

Costs and prices will stabilize. They always do. We, who used to curse at $1 per gallon gas, now cheer when it’s $1.99. Ride out the adjustments, change your tags, and remember to review compensation for your hourly and salary employees to keep them level too.

About Gordon Hecht: Gordon Hecht is a business growth and development consultant to the retail home furnishings industry. You can reach him at Gordon.hecht@aol.com