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Thread: What is a reasonable discount for a closeout floor model?

  1. #1
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    Default What is a reasonable discount for a closeout floor model?

    I am in the process of purchasing a leather couch, chair, & ottoman. I am shopping at a locally owned furniture store that has a good reputation and carries mid-level quality brands.

    My budget is around $2k for the package which precludes names like H&M. I am looking at a set made by LeatherTrend which is a division of Robinson & Robinson. The original price for the set was $4200. The last sale price was about $3200. They want $1988 for the floor models as they are closing this model out b/c "it didn't sell well in Florida". I have seen the same set online for $4500. I'm fairly satisfied with the quality, look, and feel of the set. Initial indications from the salesperson is that this is cost and not really negotiable. If possible, I'd like to knock a few hundred off to put towards an entertainment center. I'm not really worried that the stuff is going to sell out from under me as this area is severely depressed with the highest foreclosure rate in the country and 13% unemployment.

    Given the above, what type of discount should I expect on the floor model? Is it reasonable to offer below what they claim to be their cost?

    Also, I was looking in their "scratch & dent" room and found an Armoire by Hooker that I liked. It was originally priced at $1300 but has a few nicks and scratches and busted pull handles. It's now priced at $650 and has been there a while. How would you price the item? I know I can replace the handles and I can probably hide or live with the scratches.

    What do you guys do with stuff that won't move?

  2. #2
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    My reply to customers who want to 'negotiate' on already marked down-items them is 'shop around and buy it for less if you can'. Of course, they won't be able to find it for less, as its at or near dealer cost. End result, they lose out if they walk away from it.

    A store is there day after day after day. A garage or flea market or estate sale is there for one day only. The store does not have the sense of urgency that the other venues have, so if you don't buy the markdowns, someone else will. There is always a buyer for everything in the store.
    Duane Collie
    Straight answers from thirty-six years in the business.
    My Private Messages are Disabled - Please ask questions here in the forum.

  3. #3
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    Thanks for the input. As I said, I am pretty happy with the price. Like anyone else, I'm trying to maximize what I can get out of my budget. I just wanted to know if buying what is essentially a lightly used set at or near dealer cost was reasonable. It appears that it is.

    The industry would be much better as a whole, if retailers would just price items at their bottom line and not play the haggling game. Realizing, that bottom lines may change over time and they can mark things down.

    With a car purchase, I can usually go into the transaction armed with enough info to know what constitutes a reasonable deal for both sides. Furniture is much more difficult.

  4. #4
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    I've been doing this a long time and there is nothing more I dislike than getting into price haggling with a customer, so I don't do it. Pricing is nothing more than mathematical projections anyways. I know as a store owner that in order to stay in business and be able to pay my own house mortgage and send my kids to college, that I have to have a certain percentage profit from the business each year. In order to get a net profit of 'x' I have to have a price margin that reflects 'y'. The only real variables that enter into it are costs of doing business (controllable) or volume of sales (not controllable). Good years are when the volume is higher than expected, bad ones are when they are not.

    So, once you know the above there are two ways to decide how to market your business in pricing. One way is to put high prices on things hoping to snag a few customers who don't price shop, and then barter with those that are more savvy. The other way is to flat line price everything and that's all there is to it. I choose the latter for my store, because I don't think the nice lady that wants to buy a sofa should have to pay more than the aggressive young attorney who thinks he can negotiate everything.

    So, first you have to determine what kind of store you are dealing with? A high/low store or are they a flatline price one? That's where you have to do your homework on price/value ahead of time. Because if you go into a flatline price store and try to negotiate, you're going to be frustrated at the lack of cooperation and probably not buy from them. It puts you and the store personnel in adversarial positions.

    I never mark things down below my established price unless the item becomes damaged, heavily shopworn, or the manufacturer drops the model, or unless I decide at some point to drop that maker's line of goods.

    My best customers don't beat me up on price. They stay with me for many years and value the service I can offer them and are the ones I will really go out of my way for time and time again. Those that shop price alone are never loyal customers and tend to be one-time purchasers.
    Duane Collie
    Straight answers from thirty-six years in the business.
    My Private Messages are Disabled - Please ask questions here in the forum.

  5. #5
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    My research leads me to believe that I'm dealing with more of a "flat line" store.

    I went to a "going out of business" sale for a high-end store here that is closing its doors and liquidating its inventory. The prices marked are ridiculously inflated and then they are giving 10% or 20% off. The net result is the prices are still higher than the prices that their competitors ask for the same or similar models.

  6. #6
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    That's because the vast majority of "Going out of Business" sales are not handled by the store, but by a Liquidator. Here's how it works:

    ABC store decides its done. They call XYZ Liquidators. XYZ comes on site and inventories the merchandise and pays ABC .50 on the dollar at wholesale, or whatever is negotiated. XYZ nows owns everything.

    ABC is out of the picture, though key store employees will be retained to work for XYZ through the dissolution of the business. XYZ runs ads, brings in new inventory, and pays the rent on the building, etc. They will milk it as long as they can, and monitor floor traffic/sales. As long as people come in and buy, they will replenish with new stock, frequently from suppliers that ABC never even carried.

    Customer get so caught up in the "greed of the deal" they don't even bother to price compare, they just buy. Its crazy, because everything is sold AS IS with no returns and no warranty (other than any manufacturers warranties). Well, if you have a problem with that sofa after you get it home, you in for real heartache once you try to ship it back to the manufacturer and find out what that is going to cost you to 2-way freight it.

    Finding the lowest price, especially in the internet-era, is a great pastime at night with Google as your friend. The problem is - and always has been - price with no service behind it may not be the bargain a person thinks it is.
    Duane Collie
    Straight answers from thirty-six years in the business.
    My Private Messages are Disabled - Please ask questions here in the forum.

  7. #7
    soster Guest

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    Quote Originally Posted by JMM View Post
    The industry would be much better as a whole, if retailers would just price items at their bottom line and not play the haggling game. Realizing, that bottom lines may change over time and they can mark things down.

    With a car purchase, I can usually go into the transaction armed with enough info to know what constitutes a reasonable deal for both sides. Furniture is much more difficult.
    Most dealers aren't interested in haggling. They are interested in making a living. Its customers who insist on haggling that present dealers with a choice - go along and feed your family or keep your honor and starve.

    Duane has cultivated his business to the point he doesn't have to make that choice. But many stores are under stress and need to make this weeks payroll and next weeks rent, and are afraid to let anyone walk if at all possible.

    Anyways, it seems like you have enough information on this sofa to know its a good purchase. Is that not enough? Would you feel better to find it marked $2500 and haggle for a $300 discount and pay $2200? I'd rather pay the marked price of $1988.

    If it makes sense, then buy it. I have a guy waiting to hear from me on a butcher block we had in stock. We'll call him "Bob." We're closing our store, and this is an obscure item, so we worked out a price. But Bob decided he was going to wait and play chicken with me and see what kind of price it would go down to in a couple of weeks or so.

    Well, back on the first day of our closing sale someone I'd known for years came in and asked about this block. Because he's an old friend I told him I'd call in a few weeks if it was still around and give him a better price. When Bob decided not to buy I called my friend and offered the same price, and he was happy to buy it because he was paying a fraction of what this normally costs.

    I'm expecting to get a call or email from Bob very soon asking about the block, and if so I am looking forward to telling him it was sold minutes after our last conversation because I don't understand it when people decide that good enough just isn't good enough.

    Don't assume the things you want will stay there forever either. As bad as things are in Florida you still have THOUSANDS upon THOUSANDS of people there whose homes are paid for and are financially secure. You only need ONE of these people to buy the item you want and then you're back to square one.
    Last edited by soster; 02-22-2009 at 09:59 AM.

  8. #8
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    "Most dealers aren't interested in haggling. They are interested in making a living."

    Well said, Steve. Well said.

    I know that nothing makes me lose interest in a customer's needs faster than them wanting to beat on me about pricing. They do it because they're read one too many newspaper articles on how to be a savvy consumer, written by some reporter who never ran a business, but draws a salary for their living. It becomes something of a game for many, but what they don't realize is there is not that much profit margin in home furnishings, the bulk of the dollars go to the procurement of the goods themselves and the overhead of the business. What's left is the profit for the store owner (and employees) which is about 15% when all is said and done - that's the take-home pay. The amusing part is when you're offered 20% LESS for the piece and you think "Now why would I want to go 5% in the hole for that?". No thanks.

    I'll spend hours with folks in the store helping them. Its common to take four or five hours to select a high-end sofa in leather and explain the nuances of various hides, styles, cushions and then grid a layout to make sure it fits the room, etc. It's all done to help and to build a relationship and to try to circumvent any common purchasing mistakes. The goal is to get it right the first time, and make sure the right piece suits that customers lifestyle and expectations. That should be worth something, but to many its not. They simply take the information they now have and then spend the next two days calling every dealer within 200 miles to see if they can find a lower price.

    Often, when they call back, I decline to play the pricing game and wish them 'good luck' and 'happy hunting'. Its not a game I choose to play for the sake of a desperation sale. As a professional, I have to offer the customer a value for them to purchase from me. That may be my expertise, my knowledge of the product, my accommodating their needs for order timeliness, or simply making sure it will fit in their home correctly. In return, I expect to be paid for my work. A simple concept, but lost on so many.....
    Duane Collie
    Straight answers from thirty-six years in the business.
    My Private Messages are Disabled - Please ask questions here in the forum.

  9. #9
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    From a consumer standpoint I'd like to add a counterpoint. For every dealer like Duane who set his prices where he has decided they should be and that's pretty much it there are other dealers who will mark items way up and want to see if the customer is willing to pay or wants to haggle.

    As a consumer I'll ask if the price tag is just a suggested or the actual price. I also ask if the item maybe on sale soon, or if I package more then one item in my purchase might there be a quantity discount. I do not expect the store to lower their price because I asked but I do hope they inform if their is a price break, sale starting soon or that they will knock a little off of the price if I purchase a couple pieces at once. I wish every business just put what they felt was the best price on the item so I didn't feel the need to ask or see if I should haggle.

  10. #10
    debbimc Guest

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    I did see an H/M sofa marked over $8,000. in a very high end store. Surely their margin on that item is high. its is hard to determine sometimes.

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