Your furniture store isn’t the only operation about to reopen soon. Your manufacturers are gearing up as well. In the latest Home Furnishings Association Live Webinar, financial analysts Wayne and David McMahon from the accounting firm PerformNow told retailers that now is the time to reevaluate whom they do business with.
“It’s all about finding the right fit for your business strategy — or at least your new business strategy coming out of this,” David McMahon said. “What good is having a vendor — even one who’s been very good for you and popular with your customers — if when we come out of this they can’t ship?”
The father and son analysts spoke with HFA Executive Vice President Mark Schumacher as part of the HFA’s ongoing Live Webinar series. The McMahons’ webinar, “Maximize cash flow during and after the crisis,” touched on all areas of the retailer’s business, from reducing cash going out to leveraging e-commerce and in-store appointments for higher ticket averages.
Wayne McMahon said maximizing even higher gross margins will be key in the retailers’ first months back up and running. That means gross margins of 48 or 49 percent need to “be a little north of 50 percent when you open back up.”
“That’s especially important given that your volume is going to take a while to get way up to where it was, say, a year ago,” he said.
What else do vendors bring to your business?
David McMahon said vendors with lower margins will need to bring hidden benefits to your business to justify keeping them on. “So if you’re getting 47 percent from a vendor, you’re going to have to ask yourself, ‘OK, I’m good with that provided that vendor is bringing you hits on the website and you’re converting those hits into in-store traffic. There are tradeoffs for every vendor you align yourself with. Each store is different.”
David McMahon said retailers should also consider doing away with deposits on furniture — or at least increasing the amount required. He said he’s spoken to several retailers who are already going to ask for payment in full or, at the least, half down. “When you think about it, that money is like a free loan,” he said.
He said it might not be as difficult as retailers think. “It’s all about how you ask up front,” he said. “It’s no longer, ‘How much would you like to put down?’ It’s, ‘How would you like to pay for this today?’ ”
Both McMahons believe the old way of business is going to look dramatically different coming out of the pandemic. E-commerce should play an even bigger role in your store — either through sales or setting up appointments for your store, given that customers will be reluctant to venture out much. “Traffic is going to be down, so the quality of your store traffic needs to go up through your website leads,” David McMahon said. “This has been done for years in other industries — wedding dresses comes to mind — just not in furniture. I’m predicting you won’t be able to walk into a Tesla dealership after this without an appointment. I don’t think it will ever be like that for furniture, but your website needs to generate good leads.”
Good leads from website result in higher tickets
Those higher leads, both analysts said, will lead to higher average tickets.
David McMahon said generating leads from your website is not a strategy reserved for higher-end retailers. “It’s all about scoring the best leads for your price point,” he said. “Even if you sell promotional furniture, that can be done.”
For more about how the McMahons suggest retailers increase revenue while decreasing what they lay out, listen to the webinar here.
The webinar is the latest hosted by the HFA as part of the Association’s COVID-19 Recovery Resources page.