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Space is money PDF Print E-mail
Written by Alixe MacRae   

ImageTime has long been valued, but do you have the financial acumen to demand your floor models pay rent? Do you care - or know - what items on your floor produce a bankable bottom line? When it comes to placing items where they will generate the most profit dollars, furniture retailers can gain inspiration from grocers and to a certain degree, department stores, who have almost perfected the business model that demands product pay rent for the floor or shelf space it occupies.

Although it's not directly applicable to furniture, product on the end cap of an aisle - which is changed weekly - costs a pre-determined amount of money, which for argument's sake we'll call ‘X'. A similar product located mid-aisle at eye level on a permanent basis costs ‘X plus'. These costs, which are often borne by the supplier (they pay a fee to the grocer for the location) are charged because the grocery industry has done extensive studies to confirm these positions get the highest visual attention.

While a furniture store owner may not be able to actually sell these spaces to the supplier (wouldn't that be nice!), he or she can make sure the floor samples on display pay the rent required to occupy that space.

Do you know where your strike zones are? In other words, where is your floor space gold? Aisle facing locations are good; corners are better. If you're unsure, spend an afternoon sitting somewhere with a good overall view of your floor and watch where your customers pause. They'll tell you where they feel the product is worth a second look.

These strike zones or ‘gold' locations are the ‘A' positions and should net you four times the net profit of the lowly ‘C' locations. They must be tracked weekly to determine the maintained mark-up yield (defined as the actual selling price minus the landed cost times units sold). Ideally, the ‘A' position items are fashion-forward, exclusive within your trading area and produce above-average gross margins.

The silver ‘B' locations are generally only one step away from the gold ‘A' spots (hopefully the IOC won't charge me). These are generally aisle positions or the products flanking the gold. Don't ignore these locations or the products that occupy them. Being number two is not unimportant. Often these items are promotable to the ‘A' positions although sometimes they are products that are starting the second half of their life cycle. As a rule of thumb, items in ‘B' spot should earn two to three times the mark-up yield of a ‘C' spot item.

A ‘C' spot item is usually highly promotional and worth the customer's time to hunt for it - walking past the ‘A' and ‘B' items to do so. A ‘C' item could also be a clearance product or a basic item that can survive anywhere in the store.

A good example of ‘C' item is a simple black hat. One day, I was in Harrods with my mother who wanted a simple black hat. She was having no luck finding one. Finally, she asked a sales consultant where to find one. The associate answered: "They're always in demand so we don't bother to display them; they're in this drawer." That's a perfect ‘C' item story.

Someone must be responsible for the metrics of each item and location on the floor - whether it's the owner, a manager or a buyer. Each should report weekly on each product with a recommendation, which should fall within one of the following three examples:

  • Give it another week; store traffic was down 20% last week.
  • Move it, here's a new, better candidate for the space.
  • It's over-priced. Let's try this sale price which will still yield above average maintained mark-up.
Whoever that responsible person is, he or she must own the performance of their product. It's his or her job and what his performance should be evaluated on. He or she also deserves to have the opportunity and ability to learn from their successes and mistakes.

In a multi-location situation, the buyer soon learns which units are fashion-forward and which are patronized by bargain hunters. There is no size-fits-all. In a single store set-up, the task is a little different and sometimes a little more difficult, but that doesn't change the importance of making product pay rent to occupy its space on the floor.

It's also important to remember these location rules apply to all categories in a furniture store: upholstery, bedroom, dining, appliances, and electronics.

Grocery stores and departments are also very good at selling impulse items - things the consumer buys because she sees them in that moment and decides to buy. This is why tabloid newspapers, chocolate bars, gum and bottles of juice and soda can be found at the check-out counter of your local Sobey's, IGA or Loblaw's outlet.

A furniture store should have displays of its own impulse items placed strategically throughout the store. Good examples of such impulse items include: leather care kits; water filters for refrigerators; pillows; mattress pads; stainless steel cleaner; rechargeable batteries for a remote control; and, light bulbs. At least one Canadian resource is even providing a brand of laundry detergent and dish washer soap that is exclusive to furniture retailers.

Track the performance of these items as well. What is measured is important, and consequently improves. If you don't have ten of these impulse items, use your profit sense. In the paint business, most retailers have a standard saying 50% of the sale must be accessories. They consider this to be a customer service, not a cash-grab. Who wants to start a painting job with an unusable brush or roller? That sentiment translates to: "Who wants to love a new leather sofa without a way to care for it?"

The independent store owner/manager is the team leader who must deliver the bottom line so sometimes it helps to think like a landlord. Make every product on the floor pay rent for the space it occupies.

A regular contributor to Home Goods Online, Alixe MacRae is one of this country's best known merchandisers, having held senior positions at a variety of well-known Canadian retailers including Stoney Creek Furniture, Sears Canada and The Bay. She recently started her own business Concierge Relocation (www.conciergerelocation.com). Her company specializes in move management, especially for those dramatically downsizing seniors and their overwhelmed children.

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