The retail furniture industry is always challenging. Two years ago, the challenge many stores faced was around the flood of consumers walking in the door. Today the challenges are around the drought of consumers not walking in the door. In both situations, the impact on the independent furniture retailer has been the same—a struggle to stay profitable.

During the biggest boom cycle the furniture industry has seen in many years, many retailers experienced challenges as they saw revenue grow and expenses grow even faster, causing profits to suffer. The good times saw growth in the number of competitors. With the increases in competition, retailers were under pressure to keep traffic high and as a result pricing suffered.

Also during this last boom, retailers began to experience competition from new channels for moving furniture such as warehouse-buying clubs, manufacturer operated outlet stores, and the Internet. Although the channels are only a fraction of all furniture sales, the models are improving and will only prove more threatening to the future profitability of the traditional furniture retailer.

The bull market that has been driving the US economy for the past ten years is showing signs of weakening, as anyone who has been watching the stock markets can tell you. The perception of the economy has a direct impact on the buying mood of your customers. Right now there are billions of dollars sitting on the sidelines looking for direction, and once they decide to buy, the traffic drought will end and the flood cycle will begin again.

So what can you do to make sure you are around for the next leg of the cycle?

A lot of storeowners are going to try to drive sales at all costs, hoping to survive on their revenue stream. That thinking is only going to put a number of stores out of business. The stores that survive the current shakeout are going to be the ones that focus on driving their profitability.

The reason I say this is because there are only four things you can do to drive revenue:
     1. Increase prices
     2. Increase traffic
     3. Increase the number of people who buy
     4. Increase the amount they buy
There are hundreds of things you can do to drive profitability.

Driving revenue is a long process. For most store owners it means an increase in the number of sales events in an attempt to drive traffic.

Driving profitability is a short process. A process that generates results the very next transaction.

Driving revenue is a team effort. It requires a lot of meeting and it requires buy in by everyone. It requires consistent vigilance to succeed, as there is a natural tendency for the sales team to take the path of least resistance, which is to go back to the way they always did things before.

Driving profitability is a series of management decisions. Steps that can be crafted into a logical procession of steps to complete a sale or "you don't get paid."  Easy to create  Easy to execute  Easy to enforce.

Driving revenue costs money. You need to buy stuff to sell cheap. You need to advertise how cheap it is. You need to ship it in and ship it out, and hope they buy something that is not cheap to make the whole exercise worthwhile.

Driving profitability saves money. You sit down and look at all the expenses that erode your margin and find cheaper alternatives or eliminate them all together.

Driving revenue is short term. The expense of the effort to drive revenue limits how long you can drive revenue.

Driving profitability is long term. Once an expense is brought under control it stays under control until you decide to change it.

So what does a store owner do in hard times to make sure he is around for the good times? He does both.

He does both in an intelligent way recognizing there are natural economic boundaries that will have impact on any actions he takes. There is a universal economic principle called the "law of diminishing returns" that should be the standard by which a storeowner decides what steps he will take to improve his business. Those steps will always include a mix of driving revenue and driving profitability. The mix of improvement actions depends on the store.

In all my years of working with retailers, I have never seen two stores that had the exact same mix of driving revenue/driving profitability needs.

A storeowner needs to develop benchmarks that apply to his store. This requires a system for collecting information. For stores that have an industry specific computer system, the keys to your survival are already in your hands. You just have to use them.

For stores without an industry specific computer system, you will not be able to develop the benchmarks necessary to decide the appropriate mix of driving revenue vs. driving profitability.

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