Incidentally I could just as easily substituted mattress stores for furniture stores. These are my observations that I have made in the past twenty nine years. I have seen great success stories and witnessed some tragedies that could have been avoided. Here is to your success.
Is it possible to make a relatively bad location work? Yes. But rarely does it work out. Stores that are 40 to 50 years old in the same location can succeed. The old adage in real estate is location, location, and location. The more you learn about real estate the better. Always sign the shortest lease possible. Always have a way out of a lease. For example, you can negotiate a clause in your lease that lets you out of it if the shopping center anchor vacates. Always get the best location you can. Never become emotionally attached to a location. You need to be able to walk away if the deal is not right. Never pay too much for a location. If there was a furniture store there before, you can usually find out how much business they did if you ask the right people the right questions.
The single biggest mistake furniture stores make is they do not advertise enough. They believe that because they are in a high traffic location they will not have to advertise as much or perhaps at all. Traditionally furniture stores were able to contain their advertising costs to 6% of their sales volume. Now if you can keep it under 15% you are lucky. You need to invest at least 10% of your projected sales volume in advertising.
A great way to go out of business is to throw money at traditional advertising without tracking it. You will run out of money before you figure it out. Before you ever open a store you should have worked in our industry for at least seven years. The education as an employee is much less painful than the education you will receive as an owner. Become a student of advertising and explore new avenues such as sign programs, sign walkers, Craigslist, and social media. The future belongs to those who dare. Be sure to track all your advertising. Always question your assumptions and be flexible enough to change when your tracking indicates it is necessary. I will post future blogs on this.
Minimal Sales Training-
Most stores do not train their salespeople. Not only should stores train their salespeople, but they should have their best salespeople help design the program. Your training program should be flexible to adapt to an ever changing retail landscape. What gets measured gets improved. Salespeople’s closing percentages and average tickets must be
measured and over time improved. To start, invest 1% of your sales volume in training. Increase it 1% every year until you are investing 3% of your sales volume in sales training.
While some stores do not carry enough inventory most have too much inventory. When a store ties up too much money in their inventory they soon cut back on advertising. This is the beginning of the end. Advertising is the life blood of any furniture or mattress store. When advertising is reeled in because of cash flow problems sales are directly impacted in a negative way. One of the biggest mistakes small stores make is trying to buy containers when they really cannot afford to have that much money tied up for that long. The average inventory turns per year for mattresses is traditionally 8 turns. Most mattress manufacturers deliver weekly. A well managed mattress inventory should achieve 12 to 15 turns per year. By properly managing your inventory you free up money to advertise. Advertising is the key to your business’s success.
Some stores in the hopes of selling more volume sell at too low of a mark-up. The result is they do not have the money to effectively advertise. Another result of this misguided strategy is there is no money for sales education which also negatively impacts sales. Most stores need 55 to 60 percent profit ratio to be marginally profitable.
They do not buy the right looks. Buying looks that are knocked off at lower prices can put your salespeople at a competitive disadvantage. It is not easy but you must find items for your store that give you the mark-up you need and still have a strong enough value proposition with your customers to sell the required volume of goods to achieve your sales goals. The last two biggest mistakes affect all the other mistakes including this one.
You cannot effectively address the other mistakes without the knowledge of what your competition sells, how they advertise, and how they sell against your store. Granted you can learn a lot by asking your customers; however, there is no substitute for shopping your competition. If you are too well known then have someone shop your competition for you.
Most of the mistakes I have listed here can be avoided if you work in a store as a salesperson and/or as a store manager for at least 7 years. The lessons you will learn will serve you well as a future owner of a furniture store. Investing in your apprenticeship before you open your store will dramatically increase your chances of success.
I welcome everyone’s insights and comments.