Now that it’s 2013 are you ready to get rid of underperforming merchandise & people?
I fell in love for the first time in 1979. I was caught off-guard by striking beauty! Tall at 78 inches, and 39 inches across, weighing in at 250 pounds, I couldn’t keep my eyes off of that Drexel Accolade II TV Cabinet.
A year out of college, I started in sales, working at a Drexel-Heritage Showroom in San Diego, CA. That Accolade II cabinet was State of the Art with room for 100 record albums, a few dozen cassettes, and a 19” TV. Living off my $700 a month draw, I bought it at employee pricing and took a two year loan at $30 a month to pay it off. It was a struggle, but well worth it.
I haven’t used that cabinet in years, and it now sits in my basement. I have paid to have it moved 6 times and it currently stores clothes that I will never again wear. My ever lovin’ bride, Michelle, wishes I would sell it at our annual garage sale, but I just can’t let it go! I guess it’s the emotional attachment me and my Drexel share.
One old TV cabinet sitting in the basement really doesn’t make a difference, but in the world of Retail Furniture we have to cut our emotional ties when they cease to benefit us. In 2012 I traveled to over 200 furniture stores to talk with owners, buyers, and managers about building their business through improved Bedding Sales. The #1 reason retailers give for not adding new products is that their bedding galleries are full of samples, and there isn’t room for anything new.
On a trip to a medium sized Midwestern city, I encountered the same excuse. I found that the store had 54 mattresses on display in price points from under $500 to over $7,000. It occurred to me, that if they are showing 54 different models, one of those beds has to be in 54th Place in sales velocity. Another is in 53rd, and still one more in 52nd. We have a name for that group-LOSERS! Can you imagine a Bedding Factory Rep showing you a new product, and telling you it would be the 54th Best Seller in your store? And, any mattress that replaced #54 could be guaranteed to sell no worse than last place!
The question then is why do stores continue to devote precious showroom space and inventory dollars on merchandise that just doesn’t sell? Most of the reasons are anecdotal; “People ask for it”, “My sales people love it”, “I need it to beat the store down the street”, all great excuses, but not a measurable factor for continuing the investment.
It’s a new year. A great time to clear out the weeds of dead merchandise. Start by looking at 2012 performance-Inventory turns, dollars per square foot that should be at least $500/sf (a queen size mattress set is 35 square feet, but needs 81 square feet of display space), comfort and service returns, margin percentage or margin dollars. Use your average performance as the cut-off point. Quickly move off floor samples that are simply BELOW AVERAGE. When you move out those samples-price them to MOVE! Every day your store is packed with non-movers you are losing money and opportunities.
You may be bold enough to part with the #53 and #54 best seller on your floor, but are you bold enough to part with the #12 or #11 best seller on your sales team?
Think about a really nice Bedroom Dresser that your store sells. It probably has a cost of $500 to $700 or more! Imagine one of your Delivery Team members drops that dresser off your truck at a customer’s home, rendering it non-repairable; a total loss. You would probably take some sort of corrective action, but also know that things happen, and would keep that member on the team. How about if it happens the next day, another $700 loss. And then again on day three? Almost all store owners tell me they would have to fire the guy; it’s just too much of a financial loss and too many disappointed customers.
Here’s the thing -- The cellar dweller on your sales team, that man or woman in 10th or 11th place, actually costs you MORE THAN $700 a day in lost revenue and is probably disappointing 8 to 10 customers a day, more on a busy weekend! When I ask store owners why they still employ people who are performing below average, the typical response I get is “I can’t find someone else”, “They used to be my top person”, or “They come in early, turn on the lights, and do the tagging for me”.
Your low performing sales person is like that mattress set in 54th place. Anyone you hired to replace them would do no worse than last place, so you have nothing to lose. As far as performance in year’s past, the best-selling bedroom set once was Mediterranean style with injection molded plastic carving and crushed velvet armoires! And those got replaced when they didn’t perform. If you consider tagging and turning on the lights more important than selling, then hire a part-timer on an hourly basis.
Changing personnel is different than changing merchandise. Non-selling merchandise cannot change presentation, prospecting and closing techniques to build business, but sales people can! Just like evaluating performance of your floor samples, you can develop metrics for sales volume, average sales order, dollars per “up”, and returned or cancelled orders. Use these metrics to establish your store’s average so you can separate the underperforming below average sales team members. Set clear minimum performance measurements for your team with the understanding that minimums are not goals. Coach your underperformers for success, and look for positive results.
Just like you wouldn’t invest inventory dollars in the #54 best seller, don’t invest compensation dollars into another #10 best salesperson. But, before you help your failing sales team members into a different career, make sure that you are prepared to replace them quickly. Recruiting is an everyday task, and you can improve your chances of hiring your next #1 if you continually build your file of resumes. If you want to hire people that reflect the age, gender, and attitude of your customer, your best bet is to start by recruiting from your customer base. Utilize your print ads and e-mail lists to let your customers know that you are hiring. Chances are they may be looking to change careers, or know someone who wants to change.
One day I am going to empty out that TV Cabinet and give it to charity. It may have cost me a lot a long time ago, but it doesn’t add value to our home anymore. I’ll miss it for a day or two, but will enjoy the reduced clutter at home. Take time to reduce clutter, non-selling merchandise and non-selling personnel. Chances are you’ll fall in love all over again!
Note: If you know someone that wants to carry a 34 year old 250 pound TV cabinet up a flight of stairs and take it home, please contact Gordon Hecht at Ghecht@ashleyfurniture.com.