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Retail Education: Proven strategies to win the margin battle

December 24/31, 2018: Volume 34, Issue 15

 

This special FCNews Retail Education series, sponsored by 3M, is designed to help specialty retailers grow their businesses by instituting best practices across a variety of areas.

 

In today’s hypercompetitive retail environment, it’s tempting to resort to the lowest common denominator, i.e., price, to attract consumers. (That’s not to say occasionally promoting a few “loss leaders” is not effective in drawing more traffic into the store.) But in an industry where margins are already razor thin, experts say the best course of action is to eschew the low end altogether and focus on mid- to upper-end products and categories that create trade-up opportunities for retailers and, in the end, presumably happier customers.

“Box stores’ race to the bottom pricing affects the market, but when it comes to a home investment many people are receptive to paying a premium for quality, selection and expertise,” said Eric Wooten, president of Johnson Floor & Home Carpet One, Tulsa, Okla. “The most important variable in pricing is providing guidance in choosing the best materials to suit the customer’s budget, needs and taste.”

The key to trading up consumers from base-grade, entry-level products to better quality, higher-margin goods lies in the way merchandise is presented. Take the strategy employed at Allentown, Pa.-based Crest Flooring, for example. Carpeting is broken down into four distinct categories: Thrifty, Bronze, Silver and Gold. The products that meet the cut in their respective groups are placed on the retailer’s custom price list, and those products become the primary offering for at least two years. As Steve Weisberg, owner, explains: “Each product is displayed in mostly 27 x 48 sled samples. Generally, 42 products make the list with Bronze getting standard 12-months financing, Silver 18 months and Gold 24 months.”

This classification strategy eases the selling process for the store’s salespeople while expediting selection for consumers. “Our RSAs get to know the products inside and out and for our customers,” Weisberg said. “It simplifies the buying process because we are not offering products from manufacturers’ displays. Instead, we show customers the good, better and best of what we as professionals feel are the best products in their respective class.”

In any trade-up scenario, experts say the best approach is to be up front with the customer when presenting options. A good technique is to first identify the needs of the shopper vs. her “wants” (including her desire to feel she’s getting the best deal). This way, the RSA is able to point her in the direction of a product that’s more suitable for her application—which doesn’t necessarily mean it’s going to be the cheapest.

“We are always honest with our customers about the materials they want,” said Jill Tower, estimator with Hampton Flooring Center, Easthampton, Mass. “When we ask about pets, children, walkers, if a customer wears high heels, etc., it is because we want to find a floor that will not only look great the day it’s installed but will continue to after years of being lived on. When we recommend a higher-end product or a better underlayment, it’s because we honestly believe it is the best fit for that customer.”

Another helpful tip to improving profit margins on each sale is to consider more than just the flooring product itself when quoting estimates. In other words, sell the “project” not just the product. It’s a practice routinely employed at ProSource of Chicago, Elk Grove Village, Ill. “We are able to consistently upsell because we point our customers toward products that show we have a complete lineup of accessories in stock and ready to go,” said P.J. Julian, manager. “Customers are that much more likely to make a purchase if they can create the full look at one place as opposed to finding flooring at one location and their accessories at another store. We have been able to create an environment where customers can envision themselves saying, ‘I want this,’ and we have a few choices laid out to help them make the purchase.”

A similar approach is taken at Utah Flooring & Design, based in the city of Sandy. By showcasing what’s possible, design-wise, the retailer can present more options for the consumer. “We have perfected our ability to assist with shower and full bathroom remodels so we use our flooring options as a starter to open up other projects,” said Jason Darger, sales manager. “We can walk our customers through step by step and assist them with their flooring needs. Sometimes this eventually leads to us taking on the whole bathroom remodel because we have the complementing toilets, showers and other bathroom design needs just steps away.”

Another surefire way to boost sales and margins is to structure your product offering so the consumer can’t easily “shop” you against the dealer down the block or the home center around the corner. This is where distributor and manufacturer partners can help. “We ask our representatives and suppliers what our local competitors are not carrying, and that is how we know what we want front and center on our showroom floor,” said Jeff Foster, owner of Nufloors Langley, Langley City, British Columbia, Canada. “We want to know what is new and trending, of course, but having a truly diversified showroom means having something different that people can’t find down the street. This can also mean shaping what we carry depending on what the customers have requested.”