3 Ways Furniture Retailers Might Be Losing Money

By Paul Dobbins - Director, Account Development Apr 14, 2016 10:00:00 AM

Losing Money

Seeing cash slip through the cracks? Here’s why you and other furniture retailers might be losing money.

Retail is a business full of hidden costs. When you factor in rent, inventory, marketing, and more, the expenses really add up. Furniture retailers in particular have the potential to lose a lot of money on premium-priced inventory that doesn't sell fast enough, and instead sits on the showroom floor where it quietly gathers dust.

Don’t let factors like stale inventory put a hole in your pockets! Check out these three ways you might be losing money and how to potentially make up for those seemingly unavoidable losses.

Personnel

One of the biggest expenses furniture retailers face is the cost of putting together a qualified, talented sales team. This is a cost that typically generates positive returns, so naturally it's an important part of the budget. But keep in mind that when furniture sales are down, you’ll likely lose money after payroll—no matter how hard your salespeople are working.

To offset these costs, keep your core staff as lean as possible. Instead of hiring an army of part-timers, opt for seasonal employees during busy periods like the summer months and holidays. This will help you maximize your dollars spent on personnel and will lessen the blow when sales are slow.

Delivery

Furniture delivery isn’t cheap. But offering free delivery and/or assembly can be a strong selling point for many furniture retailers—one that's probably too valuable to give up. Not having to pay for delivery and assembly costs is a huge incentive for customers, and can help win their loyalty and future business, paying off in the long run.

Overstock

Furniture that sits in your showroom—or worse, your back room—long after it’s arrived is one of the most common ways retailers lose money. Too much overstock in the system often leads to markdowns and blowout clearance sales, in an effort to just to move the inventory and kick-start sales. While one could argue that a sale of some kind is better than no sale at all, having to sell your product at a depreciated cost significantly lowers margins and, in the end, causes you to lose more money.

Warranty solutions are a great way to make up for these losses. As a zero-shelf-space retail item, they’ll give your margins a boost when you have no choice but to sell your physical inventory at lower price points.

Are you a furniture retailer affected by one of these issues? Check out our Retail Moneyball white paper to get some ideas on how you can make up for your losses and maximize revenue.

 

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