Whats the markup on sofas by a retailer? I am guessing 35 to 40%?
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Whats the markup on sofas by a retailer? I am guessing 35 to 40%?
It's going to vary by retailer, price point, stock vs. custom, etc.
One the whole, according to some statistics I found from 2009, the furniture industry operates on gross margins of about 40% with net profits of less than 2% (with most retailers falling between a 0% and 5% net profit). Stores with net profits below 2% are at risk of failure.
You must be thinking of opening up a retail furniture store? I'd not recommend it - you're under unrelenting pressure from the retail customer to lower your prices on a daily basis, its tough to make margin.Quote:
Originally Posted by deskjockey
Being an Electrician would be better.....
I think the perception of the retail customer is that the furniture retailer is making a lot of money on a relatively simple product, hence the pressure to lower the price.
For example, a retail customer can understand why a smartphone costs about $500 but its not as easy to understand why a half way decent sofa would cost 2k to 3k.
When one thinks about "markup" it is important to also think about a free global competitive environment. The "markup" is influenced by the competitive pressures on price in-general in that if a Retailer was just raking in the profits, some competitor would be badly beating his price. The markup has to make up for all those hours of lights, heat, capital assets and employees just sitting there while the ice and snow keep shoppers at home. Supply-Chain participants also must share across the collective Markup of the product.
Also keep in mind the labor content of the product. In the case of the sofa most of the components, from the lumber, hides if leather, and assembly are all extremely labor intensive. Most of the components in the cell phone are mass produced by automatic machines with minimal labor except in assembly. Add to this the transportation and storage costs of components and finished products and again you can appreciate the price difference in your comparison of the sofa to the phone. Finally, unit volume is critical to manufacturing efficiency. Many millions of phones are made in limited factories annually verses far fewer sofas in many more factories. This has impact on overhead unit costs.
As a consumer, I would like to see the guys who actually build and transport the sofa, make decent money. Consumers should not have to pay for fancy lighting, expensive mall location, marketing BS, polar vortexes, models, suits etc. Most annoying is the sales talk of the pants on fire salesmen.Quote:
Originally Posted by wisejd
Since I posted this, I read other articles about the furniture business. Its probably comparable to used car business.
Now I get banned from this site.
The good news for you deskjockey is that there are many choices in how and where you purchase goods and services. It is best to remember that business people in a free global competitive market are always feeling the pressure to improve their operations from an efficiency, effectiveness and customer satisfaction perspective. Don't forget you can (and should) tip the delivery team.
Furniture Markups: 200-400% No industry manipulates the meaningless MSRP (Manufacturer’s Suggested Retail Price) quite like the furniture industry. Salespeople usually receive a 15-20% commission if they sell an item at the inflated MSRP. But there’s another helpful abbreviation to know: MAP (Manufacturer’s Advertised Price). This lower price is the minimum at which most retailers are allowed to sell the item. Salespeople resist consumers who ask for this price and only receive about 7% commission on MAP sales.
http://www.wisebread.com/cheat-sheet...n-common-items
Ideally consumers would have a choice between paying for those things or not. Some of those listed have a purpose beneficial to buyers, though. They facilitate product awareness, ease of seeing/trying the merchandise, and purchase.Quote:
Originally Posted by deskjockey
And in many cases consumers do in fact have such a choice. They can choose to do all the homework themselves, buy a piece of furniture sight unseen from a low-price remote dealer, and just hope that they actually wind up liking it. Alternatively they can go to the closest dealer at the big-name mall nearest them and actually see some of the pieces and options in person, before buying. But paying the requisite premium for this convenience. After all, those mall rentals lighting and salespeople are not free. Or in some cases they can seek out a dealer in their area that is not in the big high-priced mall, but rather in a hole-in-the-wall out of the way, but still accessible, location, that happens to charge less than the big-mall dealer does, due to its lower overhead.
But let's face it, in many cases, with many products, the big dealers do not prefer to have all that competition, so they try to get makers to impose price guidelines. Where this is successful consumers obviously have fewer choices.
This does not mean that a 'real" store, with real salespeople, in a convenient area, is something nobody should be willing to pay anything for.
It may be something YOU don't want to pay for. But not everybody wants to devote their lives to buying a piece of furniture.
MSRP is set ridiculously high because Decorators demand it, not stores. I absolutely detest the furniture industry MSRP and refuse to 'work off it'. All my pricing is wholesale plus - I only have wholesale books on my desk and quote a percentage above that necessary to earn an income and pay for overhead. Nothing irritates me more than the errant consumer who comes into my store and wants to have a discussion about what HE/SHE thinks I should be making for a profit because he read up on some consumer web sites about how much some store makes (in theory) written by some clueless reporter who has no idea what they were writing about, either. If you want to get shown the door at my store, that's the fastest way to achieve it - I can guarantee it.
And here is what Decorators do and why the industry has high MSRP's. Once again, its consumer-driven because we are cultural that is all wrapped up in 'Free'. Clients want free decorating advice and agree to buy the pieces from the decorator who sources them. And the decorators will only sell the client furniture they have accounts for. They sell at MSRP but don't bill you for their services, that's how they make their money. It would be much better to hire a decorator for $ 100 an hour to work up a plan, then go furniture shopping on your own, but no one wants to pay that design consult fee when they can have 'free'. The really smart person knows that no one works for free - and you are going to pay one way or the other.
Everyone likes a deal. I do, too. But you also want your dealer to stay in business and it does no one any good in the community when a business fails. Tax dollars are lost, consumers lose a resource, real estate goes vacant and people that were in the business go on unemployment. Making a profit is a necessity in business, its not a dirty word. The furniture industry as a whole lost over half of its retail stores and half its USA manufacturers in the 2007/2008 recession. I had to let all my people go and was nearly out of business myself, in fact I had begun calling my suppliers and telling them I would be closing up at the end of the month. One of them talked me into hanging on another month and said 'That invoice you have from us - just park it until you can pay it", and that gave me enough operating cash to make it through that month and see a slight turnaround. I sure as heck wasn't making 'too much profit'. Even today, I am still without employees because I don't feel I can afford to bring on a full-time person, and most the furniture makers are still operating a on a 4-day work week. The American furniture industry is recovering, but it has not yet recovered.
If you have to have cheap - buy the Chinese imports. It's garbage, but its priced right. Then you will have a $ 999 bi-cast or bonded 'leather' sofa for the next 5 to 7 years that is collapsing after 18 months of use, but you'll have enough cash left over to go spend $ 150 a ticket on a baseball/football/hockey game with $ 12 beers and $ 10 hotdogs and $ 30 parking fee.... now THAT is a bargain!
And if you want a general idea of a very fair retail price 50% off MSRP puts you with an aggressive discounter in the furniture trade.
Thank much.Quote:
Originally Posted by drcollie