Originally Posted by
drcollie
When I first got into this business, I decided to buck the trend of "FURNITURE SALE! 40 to 60% OFF!!" that is standard practice in this industry. I saw it as needless and indicative of snake oil salesmen to market that way, and it requires neon signs in the store and constant advertising. That was nearly three decades ago and I'm still here, so it shows that my formula worked enough to at least stay in business. I only offer an additional discount when the manufacturer offers ME one, such as the ongoing H&M 5% off Sale. Folks say... "Only 5%!?" Well...yeah....that's what I am getting so I'll pass it onto you.
To cut through the chase on things and get to the bottom of it all, the industry as a whole marks up 3x the dealer wholesale (there are exceptions to this, but for the majority of suppliers this works). So, an item that the dealer pays $ 1,000 for has a MSRP of $ 3,000. If the dealer sells at 40% off, then the retail is going to be $ 1,799 and if they sell for 50% off then its $ 1,499. Gross Profit Margin (GPM) is (Retail - Cost) / Retail so at 50% off that works out to a GPM of 33%. There are not many furniture stores that can stay in business if they attempt to operate at under 33 % GPM. If they run a VERY tight ship, with no debt, low rent and few employees, they may net 15% from that at year end if they get a decent sales year. And that's for a very aggressively priced store in a rather poor location. If you put them into a mall environment or a 'nice' location in a major retail area that 33% won't cut it and they will need another 10% to cover the real estate costs . Few stores in major cities such as Washington DC / New York / San Francisco / Chicago, etc. can afford to do 50% off every day, the margins are too low and expenses will grind them up (warehousing costs will eat them up as well, warehouse space is prime in major cities). That's why big discounters are usually in small outlying cities or warehouse areas where the space ie cheaper. Because the margins are what they are, you can now see why a 2 to 3 % credit card transaction fee can have quite an impact on the bottom line. That, in a nutshell, is how it all works. I run about as lean as a store can possible run - which is why I can price so aggressively. A lot of my local customers would like me to move to a 'better' location and I dearly would like to as well, but I'd have to add that 10 % onto the selling price to cover those nice locations and that has always made me cautious of a move.
You might be surprised at how much service is required after the sale. At any given time I have about 6 to 8 issues I am working on for customers. As I write this I have in the hopper the following and all require time and effort to pursue:
* A table refinish that a customer left in her sunlit kitchen window and it faded out dramatically due to constant UV rays. Not a warranty issue at all, but I'm not going to tell her 'too bad, buy a new table'.
* The third swivel base replacement on a H&M Swivel Recliner chair that the customer says doesn't rotate smoothly enough but bases # 1 and # 2 seem to work fine at our store.
* A replacement footboard on a bed that has a sap pocket in the wood. It's 'normal' but the customer would like it replaced so we will.
* A chair that is going back to H&M for replacement leather on an arm after it had been delivered due to a mysterious orange rash on it that no one seems to know how it occurred. I am replacing the leather at my expense.
* A set of replacement cores for an H&M sofa that I did not sell (their dealer had gone out of business) and I am sourcing for them as a courtesy.
* Treharn forgot to drill a cord hole in the back of an entertainment center that we shipped out of state (direct pickup), so coordinating to get a handyman there to drill a few holes in the back of it.
* A H&M Power/Lift chair in a high-end leather that my good customer ordered for her invalid husband and he was uncomfortable in it - so I have it back here on consignment to sell as a courtesy.
Customer service is one of those things where if you don't need it - you're golden. But when you DO need it, its really nice to have someone that will actually do something for you. And as you can see, many of the issues are not cut and dried - things many stores would say 'Sorry, that's not our problem". I try to operate at a higher level than that when I can.
As to the amount spent - $ 20K is not a particularly large number, I get an order that size regularly. When you work off realistic percentages in your business, you would have to have a huge order to compensate for the reduced percentage margin to cover it - if the order was say $ 100K, then there might be a tad bit more room in a discount, but also keep in mind that big orders present their own set of issues as well, such as having enough warehouse space and trucking capability to handle it. Often that means renting extra storage space and an additional truck / crew which is an added cost. When I did seventy-two pieces of Hancock and Moore for The White House (1600 Penn. Ave). I was getting a lot of pressure from the GSA buyer for additional discounts. I called H&M and asked for one and was turned down, and was presented with "We will have to put every employee on this order to get it all done at the same time and there is no efficiency in that, in fact it will screw up our production schedules to drop everything do make this order in a timely manner". After I got off the phone, I realized that was correct. So I couldn't get the GSA buyer a lower price, but still won the bid as my every day price was lower than anyone else's on the items by quite a bit.
I think everyone has their own comfort levels of buying - not only furniture but in every consumer product from a car to a house to a piece of jewelry. You have to buy in your comfort level, or maybe just a little beyond. When you exceed it, then your expectations of what it should be and the anxiety of the price overcome the fun of the purchase, and you really can't enjoy it like you should. Probably best to seek out pieces that work for you within that comfort level and stay in that range. You won't find anyone fireballing out Stickley to my knowledge, the maker controls the distribution too tightly to allow renegade discounters to sell the line.
Re: Stickley Furniture prices are confusing me, how to budget?
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