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Furniture & Mattress Stores – How I Saved My Business!

I was losing my business. I could no longer pay my bills on time. I have always had great relationships with my vendors. I never chose a confrontational negotiating style. I have been transparent with my vendors, allowing their hunger for increased volume to drive their prices down which gave me the margin I thought I needed. It seemed to work. I was increasingly finding myself on credit hold. It started with one vendor but now most of my vendors had me on credit hold. After spending around 25 years in this business could I be buying wrong? Was I merchandising wrong? I thought my advertising was great. Could I be misspending advertising dollars with the wrong media or the wrong message? I thought my salespeople were better than my competition. Was I mistaken? My stores’ displays were cleaner and more inviting than my competition. Were my displays too nice making customers think I was high priced when I knew for a fact that I wasn’t? My volume was a little lower than I wanted but not that bad. My margins had slipped a bit but they were still in the high forties. Today my business is thriving. Here is how I saved my business!

New Eyes- I needed a fresh perspective. I needed a new pair of eyes to look at my business objectively. I enlisted the help of the most successful business person I knew. 

Evaluation- My expert told me that she had good news. My business could be saved!  The inventory was way too high. I was spending too much money on advertising. I found out that my best performing vendors was not a name brand. This shocked me! I found out that one of my worst performing brands was one of the biggest name brands. I was paying too much rent in most of my stores. Two low producing stores were identified. They were dragging the other ones down. I needed to re-energize my salespeople. They were ok but not as good as we needed them to be. My service was above average. It needed to be great. My reputation in the marketplace was above average. It needed to be great also.

Inventory- My inventory was too high. I identified my best sellers. I actually increased my stock of the bestsellers. Overall stock levels were reduced dramatically. Once the inventory level was reduced it freed up cash to help pay the bills.

Advertising- I had traditionally used a shotgun approach to advertising. Sure I tried to track what media pulled the best. I would have to give myself a D in this area. It just wasn’t that important when business was good. Now that things were tight it became crucial. My beloved radio was dropped. It wasn’t pulling traffic into the stores. TV was cut in half. The decision was made to only use TV around the holidays for major promotions. I cut my newspaper budget in half. The decision was made to increase my sign program.

Merchandising- I was shocked that one of my non brands was my best performer for sales per square foot as well as stock turns. My margins were also dramatically higher with that same brand. Here is the best part my return rate was much lower with this brand. As an extra benefit this non brand also had one of the best reps in the industry. Now the biggest shocker the name brand that I believed was the backbone of my business was one of my worst performers. I knew the line wasn’t as hot as it once was but I was not prepared for the low sales per square foot, low margin, and high return rate. The rep wasn’t the strongest. He seemed distant and did not seem to care about my overall business. The new target margin was 60%.  My sacred brand was going to lose a substantial amount of skus. The new skus to be brought in had to meet the new 60% margin requirement.

Display- The decision was made to leave this alone.

Store Locations- Several store leases had to be renegotiated to achieve lower rents that were more manageable. I was able to renegotiate the leases.  I also closed two stores that were not performing.

Salespeople- My salespeople were above average but we needed them to sell more higher margin product. I changed their compensation to be 100% commission. The commissions were set up on a sliding scale. If they could get the higher margin they would actually be paid more. If they sold at lower margins they would not make as much money.  I did not want to but I felt that I would at least lose a few salespeople who would leave because they would no longer have the safety net of their salary. I only lost one low performing salesperson. The ones who stayed are now making between 19-51% more money than before. I also asked my vendors to do more training with my salespeople.

Service- I needed to get involved with both my salespeople and my customers. I became the final arbitrator to handle the issues that my managers could not handle within the parameters that I gave them. I believe that my personal touch has helped us retain more customers and salespeople. Granted it’s more work but I find it to be a great way to stay in touch with my salespeople and my customers.

Leadership- I led from the front. I decided instead of working from home, I would work in my office where I was more visible. I was asking everyone in the company to step up. I felt that I needed to be a good example. My employees would now see me more. I had to have discussions with all my vendors regarding two important issues. The first was I had to negotiate the repayment of my debt to insure that I received timely deliveries. Now that my inventories were lower, timely delivery would be critical. I also shared the basics of my game plan with my vendors. I needed them to help me to further train my salespeople. I also needed most of my vendors to help me re-merchandise line-ups that would achieve the new 60% margin goal. The vendors who helped me are now doing substantially more business with me. The ones who didn’t are doing less business. A lot of great people were involved with the turn around of my business. I will be forever grateful to all my employees, vendors, and landlords who made this turn around possible.

As told to Pete Primeau

Please post any comments or questions.  I answer them all. 

 

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Comments (3)

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  1. John Hays says:

    Great blog. Energetic, to the point, successful. Thank you.

  2. Pete says:

    Thanks John!

  3. Good article and to the point. Not great times at the moment and any help to survive is appreciated. Thanks.

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