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Sweating The Retail Details - Part 2

Furniture World Magazine


In the last issue of Furniture World, we discussed how seemingly insignificant changes in a few key performance metrics for your store have an amazing impact on the end results… your store’s profit. Amplification happens when you are focused and pay attention to details. That’s when your profits skyrocket. Attenuation occurs when you take your eyes off the ball and profits plummet.

This economy is still fragile and retailers must make a very determined effort to focus on High Value Targets. Part one in this series (in the July/August issue) included a test for readers that proves (plugging in your own numbers) how dramatically profits go up or down with small changes in traffic, close percent, average sale, margin and expenses. When all of these things converge and align in a good way, profits soar. When these things converge in a bad way your profits fall.

If you have not completed this test, please do so. It can be found at https://www.furninfo.com/Authors/HalMcClamma/36 and it is a real eye opener.

There are over 100 High Value Targets for home sector retailers that high achieving retailers do every single day without fail.

The law of cause and effect states that if we find a successful retail operation and duplicate what they do, similar results will be achieved.

For this article, I have narrowed the list down to the Absolute Non-Negotiable Top 10 High Value Targets. These are what I call ‘Just Do It’ items. If you do them you will succeed. If you don’t do them, you will continue to struggle and achieve far less than your company is capable of.

Top Ten High Value Targets

Lets take a look at the Top 10 High Value Targets. They are presented in no particular order because being weak in any one of these areas can and will derail your overall effectiveness.

HVT-1a Marketing

Count Traffic: The goal of marketing and advertising is to drive “Qualified” traffic to your store. Unfortunately, most retailers do not know what their qualified traffic demographic really is, nor do they count store traffic. I have asked many a retailer if their last ad campaign worked, and 99 times out of 100, they go to their computers to look at sales data for the time period in question. This thinking is ABSOLUTELY WRONG.
  • The ONLY goal of your marketing efforts is to drive qualified traffic into the store, the phone or your website. 
  • The goal of the salesperson is to convert qualified traffic to sales. 
  • And the goal of the merchandise department is to have products available for sale in the qualified traffic sweet spot. Start counting traffic today. Count by day and by hour. 
Determine your qualified traffic demographic and relentlessly target it in your marketing efforts.

HVT-1b Marketing

Where is your traffic coming from? You must determine your marketing lead sources and sales by marketing method. Be serious about asking your customers how they found out about you, or what prompted their visit to your store. Be diligent. Once you capture sales and traffic by lead source, you can validate a campaigns’ effectiveness.

QUESTION: How much does it cost you to have a prospect visit your store by media method? How much does it cost you to acquire $1,000 in sales by each media method? Rank them today.

HVT-2 Marketing

Implement 21st century marketing: Most home sector retailers are stuck in a 19th or 20th century marketing rut. If you are not using managed internet search, social media or pre-roll video marketing, shame on you. You are missing out on some incredibly high ROI opportunities.

One retailer in a small town of 67,000 is gaining 200 new prospects a week and attributes almost 40% of store volume to Facebook alone! 21st century marketing is easy to validate and incredibly affordable.
Funny thing... most home sector retailers resist spending a few thousand dollars a month on these high ROI 21st century marketing methods but still snuggle in their comfort zone and spend 10 times as much on outdated, difficult to validate, low ROI media methods from the 19th and 20th century.

HVT-3 Sales

Train, measure and hold your salespeople accountable. Most home sector retail salespeople could use some training and polish to say the least. In most home sector retail stores, there is a huge range of performance with a few salespeople at the top of the sales rankings, a bunch in the middle and a few at the bottom.

A wide range in performance should concern retailers greatly. Many retailers will simply say this variance is due to some salespeople being better. Well duh! WARNING: The most disturbing issue with a wide performance range is that the customer has a wildly different experience in the store depending upon who greets them.

Train and measure your salespeople. Reduce the range of performance. Reduce salesperson turnover.

HVT-4 Merchandising

Shop your competition: I am still amazed at how few retailers actually shop the competition. The normal excuse is… “I cannot go in there, they know me.” My reply, “Just do it.” You must know what’s going on in your marketplace. And I suggest your salespeople shop the competition too. If you do not personally shop your competition often, you may very well make poor decisions based solely upon hunches. Validate what your competitors are doing and if needed make adjustments to your strategic plan. Hold vendors accountable for distribution promises. If prices decline due to competitive issues and your GMROI suffers, consider changing SKUs and/or vendors.

HVT-5 Merchandising

Attain appropriate margins. The really great retailers in our industry sell based upon value, not a formula. This High Value Target is short and sweet… make margins on your product. Don’t be scared of obtaining 55-60% margins. Learn to sell. Stop reacting in fear of losing a sale.

HVT-6 Merchandising

Develop a plan. Once you know how your vendors, categories and SKUs are performing, you can build a meaningful merchandise plan. One retailer was facing stalled mattress sales over the last year. The first step in solving the issue was to look at their mattress lineup on paper. Once the lineup was displayed in a merchandise chart, the problem became obvious. There were many gaps and overlaps. They were under represented at price points under $1,000. And, foam beds were non-existent below $1,500. Once these cavernous holes were filled in, sales took off again. Deterioration of a retailer’s floor merchandise assortment is subtle, and it’s easy to become irrelevant in one or more categories.

HVT-7 Merchandising

Measure your merchandise effectiveness. Most home sector retailers are unable to validate their merchandise assortment’s effectiveness. I suggest you measure every SKU, category and vendor. Once you measure the effectiveness of your lineup, you can start augmenting the best sellers and eliminate the slow sellers.

Many retailers can easily spout their top 10 best sellers in upholstery. Then when the actual rates of sale, GMROI and gross margin production by SKU are computed, the real VALIDATED best seller list looks nothing like what they intuited. Intuition is what makes someone a great buyer at furniture markets. Validation is what keeps a SKU or vendor on your floor.

HVT-8 Merchandising

Measure GMROI then augment and cut. GMROI is the best measurement of merchandise performance in home sector. GMROI is an acronym for Gross Margin Return On Investment. (The Investment being Inventory) The GMROI measurement combines two other measurements into one very useful Holy Grail of merchandise measurements. GMROI is a combination of Turn Rate and Gross Margin.

If you looked up your number one selling SKU based upon turn rate it would probably be queen bed frames. If you looked up your number one SKU based upon gross margin, it would probably be an accessory piece. However, GMROI combines these two measurements into one phenomenal measurement. The higher the GMROI the better. Find your average GMROI. Watch those SKUs, categories and vendors that are well below average. Cut the lowest ¼ GMROI SKUs and vendors and augment the top ¼ GMROI SKUs and vendors.

HVT-9a Merchandising

Reduce back up stock and DEAD inventory. Shift to quick ship vendors. Rely on their inventory and stock as little as possible in your warehouse. Many retailers have huge dollars tied up in DEAD inventory. DEAD is the bottom ¼ in GMROI, discontinued, obsolete, mis-matched and damaged inventory.

HVT-9b Merchandising

Reduce your vendor list. I might add, reduce your vendor list. A retailer once complained about a vendor that sold so and so down the street. I asked how much volume he did last year with that vendor and the reply was, “$8,250.” I’m sorry, but with 50-60 vendors you are not important to most vendors. Companies and reps must make a good living just like retailers. Pick your top 10-15 high GMROI quick ship vendors and stick with them. Become important to them. Create a real partnership. If you are committed to them, you can and should expect their commitment to you.

HVT-10 Expense Control

Develop a budget & watch every penny. Most retailers do not have an annualized budget for their stores. This is a must. A budget is a translation of your strategic plan into meaningful and measureable numbers. Having no budget is like having no goal. Once you have a budget, cut it by 10% across the board. Sounds difficult and perhaps rash but, “Just do it.”

The definition of insanity is expecting different results while doing the same things you’ve always done. You cannot “wish” your way to success. Wishing is great. Wishing and dreaming helps you create a vision of your business. But at some point you must translate your vision into action.


Just do it. When you implement these Top 10 (HVT) High Value Targets in your operation, you will see amplification take hold and your profits will soar.
  • By training your sales staff, your average sale will increase, your number of sales will increase, your margins will increase, your customer service level will increase and delivery issues will decrease. 
  • By merchandising properly you will increase your GMROI and you can also manipulate your average sale and margins and your inventory on hand will decrease. Oh, Did you notice how many High Value Targets are related to merchandising? This is a huge area of opportunity for retailers. 
  • By marketing properly, you will increase qualified traffic to your store at an ever reduced cost per acquired lead. 
  • And by implementing sound fiscal policies and creating an annual financial budget, you can benchmark your progress along the way and cut unwarranted excess expenses. 
FREE Marketing and Advertising Quiz for Furniture World readers: Since several of the HVT High Value Targets in this article have to do with marketing, Integrity Business Coaching is offering a free resource. Go to www.hvtmarketing.com/online-quizzes and take the Advertising and Marketing Quiz. You will receive a free management report detailing your results.

Founder of Integrity Business Coaching, Hal McClamma has over 30-years in the home furnishings, appliance and electronics industry. He has owned successful furniture stores and sleep shops. McClamma has been a distribution center manager, single and multiple store manager and company VP for Havertys Furniture, Barrow Furniture, Maas Brothers, Burdines and Jordan Marsh. Contact Hal at Hal@IntegrityBusinessCoaching.com or call 334.470.9999.