Profitability Consulting Group

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The retail furniture industry is always challenging. Two years ago, the challenge many stores faced was around the flood of consumers walking in the door. Today the challenges are around the drought of consumers not walking in the door. In both situations, the impact on the independent furniture retailer has been the same—a struggle to stay profitable. During the biggest boom cycle the furniture industry has seen in many years, many retailers experienced challenges as they saw revenue grow and expenses grow even faster, causing profits to suffer. The good times saw growth in the number of competitors. With the increases in competition, retailers were under pressure to keep traffic high and as a result pricing suffered. Also during this last boom, retailers began to experience competition from new channels for moving furniture such as warehouse-buying clubs, manufacturer operated outlet stores, and the Internet. Although the channels are only a fraction of all furniture sales, the models are improving and will only prove more threatening to the future profitability of the traditional furniture retailer. The bull market that has been driving the US economy for the past ten years is showing signs of weakening, as anyone who has been watching the stock markets can tell you. The perception of the economy has a direct impact on the buying mood of your customers. Right now there are billions of dollars sitting on the sidelines looking for direction, and once they decide to buy, the traffic drought will end and the flood cycle will begin again. So what can you do to make sure you are around for the next leg of the cycle? A lot of storeowners are going to try to drive sales at all costs, hoping to survive on their revenue stream. That thinking is only going to put a number of stores out of business. The stores that survive the current shakeout are going to be the ones that focus on driving their profitability. The reason I say this is because there are only four things you can do to drive revenue: 1. Increase prices 2. Increase traffic 3. Increase the number of people who buy 4. Increase the amount they buy There are hundreds of things you can do to drive profitability. Driving revenue is a long process. For most store owners it means an increase in the number of sales events in an attempt to drive traffic. Driving profitability is a short process. A process that generates results the very next transaction. Driving revenue is a team effort. It requires a lot of meeting and it requires buy in by everyone. It requires consistent vigilance to succeed, as there is a natural tendency for the sales team to take the path of least resistance, which is to go back to the way they always did things before. Driving profitability is a series of management decisions. Steps that can be crafted into a logical procession of steps to complete a sale or "you don't get paid."

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