December 5/12, 2016; Volume 31, Number 13
By Vinnie Virga
Many flooring retailers tell me they cannot compete with the likes of home centers and liquidators. In my experience, these retailers are either listening to the whining of their salespeople (read: excuses for not closing sales) and/or they are not regularly shopping their competitors and don’t understand how they operate.
Following are a few helpful ideas and strategies to increase traffic and better compete with the big boys:
Shop your competitors. While there may be a few competitors you may know so well that you choose to send someone in on your behalf, the vast majority of the people out there selling floor covering don’t know you, and they don’t care if you shop their store. The worst thing that will happen is they will kindly ask you to leave. Trust me, you will survive.
Promote “loss leaders.” This technique entails promoting certain entry-level products at or below cost to create the impression the entire store has competitive prices. Know what these loss leaders are, know the products and find out details. For instance, is the sale on one color or every color? Be sure you are at or below the competition’s prices if you want to be credible; if you can’t do that don’t sample those products in your store.
Advertise specials on labor. For example, offer $29, $69, $99 or even “free labor.” Remember, the big guys have fewer installers willing to work for free than you do. You have to look at the total package being offered at these stores and factor in everything on the final written estimate. They charge to measure, unload the truck, etc. Understand what and how they charge and you’ll see that when it nets out, your offer of free labor isn’t so bad. Don’t forget the trims, metals, pad, etc., all the little things they/you can charge so much for. (Disclosure: We have a 65% gross profit margin on all of the “little things.”) It might sound counterintuitive, but you should always compete with the total price when it is to your advantage. Remember, customers usually pay attention to the price of the main product, the cost of the basic installation and nothing else.
Zig or zag?
Armed with this information, ask yourself if you should “zig” or “zag.” By zig I mean do the polar opposite of what the competition is doing. For instance, if they promote free installation, your position should be, “Labor is the most important part of the job, we have the best installers and we don’t think you want someone doing the job for free. Besides, our total installed price is always lower than theirs, and isn’t that what matters most?”
Conversely, zag means if you can’t beat them then join them. Raise your selling price to accommodate what you charge for basic labor. Then make sure you are making 50% to 65% margin on all your other labor items and make at least 65% margin on the little things. Your overall profit margin should remain the same as usual.
Once you have your strategies in place, communicate them with your staff. Hold regular sales meetings where your team conducts role-play exercises handling phone calls, emails and live interactions with customers with objections based on your competitors.
Competing with the big boys is easy—providing you have a plan and stick to it.