That is the million-dollar question
By Alan Wolf, YSN
The herky-jerky nature of the COVID-impaired supply chain has seen dealer warehouses go from bare to busting at the seams in a matter of weeks.
But combined with the one-two punch of soaring inflation and slowing consumer demand, the inventory surplus has created a quandary for retailers: Should merchants resume sales promotions to clear up the product pileup, or try and hold on to the higher price points that they and their customers became accustomed to during the pandemic?
The answer, according to BrandSource members and industry experts, is somewhere in between.
All would agree with AVB’s own advice to its dealers, which is to flush out older, higher-cost merchandise that adds to their overhead and make way for more competitively priced goods. Indeed, as furnishings analyst Jerry Epperson, managing director of investment firm Mann, Armistead & Epperson, told Sleep Savvy magazine, the change from just-in-time, vendor-managed inventory, at least within the mattress sector, has had a keen impact on margins. Mattress retail’s historic profitability was driven by domestic manufacturers’ decades-old strategy of rapid delivery, he explained, which eliminated the need to carry deep inventories with a complex mix of brands, models and sizes.
Related: AVB Plans Aggressive July 4th Promos
The trick for dealers now is skillful inventory management that moves out costly, slower-moving goods without disrupting the furniture cart. BrandSource member Miskelly Furniture, for one, has been focused on the types of items to promote for this summer’s big holiday weekends.
“We will identify some things we are over-inventoried on and push those very aggressively,” case goods merchandising director Gentry Prestwood told Home News Now. Presswood cited a bedroom set that Miskelly had originally priced at $699 and later discounted by $200 for an April promotion.
“We still made a good enough mark on it in the whole scope of things, where it was not something we had to give away,” he noted. “We are all hoping it doesn’t come to that.”
Taylor Ganz, a former owner/CEO of a top 100 retail chain and current senior VP at Profitability Consulting Group, agrees with Miskelly’s targeted approach. “When you’re planning your next promotion, avoid huge storewide discounts unless you’re just doing it for a one- to three-day period,” he wrote in a blog reposted on Home News Now. “A more profitable way to proceed is to highlight ‘Huge Savings in Every Department,’ rather than providing savings on every single item in the store.”
“And never discount best sellers,” he added. “We have never understood why people do that.”
In advance of promoting a particular line, Ganz also suggested contacting the vendor, which may agree to participate in the sales event through cost rebates, co-op reimbursement or spiffs.
To that advice analyst Epperson would add resuming aggressive advertising; touting the store’s consumer financing options; and clearing out dead wood.
“Inventory management is cash management,” he told Sleep Savvy. “Got too much? Sell it, liquidate it, or whatever, to keep your focus on the good stuff. You can have too much of anything, no matter how good a deal it was when you bought it.”
BrandSource, a unit of YSN publisher AVB Inc., is a nationwide buying group for independent appliance, mattress, furniture and CE dealers.