Home Furnishings Retail: What Owners are Up Against and How to Overcome Key Challenges

This year at Las Vegas Market, industry expert and consultant David McMahon, held a seminar on retail challenges and solutions in the home furnishings industry. The goal was to conduct the seminar in an open-forum fashion, letting those in attendance share their biggest hurdles and discussing potential solutions for each with the group.

PROFITsystems performance groups meet to increase profitability


Below are the three issues cited most frequently by seminar attendees, followed by David’s response and proposed solution to each.

Warehouse management, inventory management and strategies to keep best-sellers in stock 

In response to this challenge, David began by explaining what he felt was the key to managing inventory as effectively as possible: the 80/20 rule. “In order to manage inventory more effectively, you really need to know which parts are producing for you so you know where you need to be spending your time,” David said. The 80/20 rule states that, typically, 80 percent of your profitability or margin comes from just 20 percent of your items. If retailers are able to determine this 20 percent portion of their inventory that’s contributing most to their bottom line, they’ll know which items need to be ordered often, displayed well and stocked appropriately to be as profitable as possible.

David highlighted the importance of also having a systematic routine for the way retailers dealt with the portion of their inventory that wasn’t producing – their dogs. “The only way to buy new inventory as fast as possible is by identifying your slow-moving items and getting rid of them so you can make better purchases at market,” he said. “With inventory management, the systems define the outcomes. If you want to manage your inventory more profitably, you need a good system to handle reporting for best-sellers, and an equally good system to handle the markdowns for your dogs,” David added.


When asked about how to manage pricing, David said: “Pricing is tricky. You don’t want to be known as the guy with the highest prices and you don’t want to be known as the cheap, discount store either. I’m a believer that you should be pricing higher on what’s working and a believer in high-low pricing. When an item is working, you should test the ceiling on its price. When an item is not selling as well, that’s when you mark down.”

“Some things are more expensive, some are average and some are cheap. The issue is most every retailer uses the cost-up approach, where all of the margins are the same. Say everything in your store is marked at 50 percent margin or 100 percent markup; that doesn’t work because you have some things underpriced and some things overpriced. You need to take a detailed view and price high with some things and low with others,” David added.

David wrapped up the pricing discussion by reminding listeners that it’s not only about price and GMROI plays a very important role. “If you’re turning items really quickly you could be making more margin dollars or GMROI (Gross Margin Return on Investment). Therefore, that needs to be looked at too: not just how you price an item, but how many you carry and how quickly it turns,” he explained.

Managing store traffic and staffing appropriately

David responded to this ever-common issue in the industry without mincing word. “You have to know your traffic, period,” he said. He continued to explain retail traffic counting, and how investing in a traffic counting system is a great way to be sure of your traffic volume and determine things like when it peaks versus when it’s slow, as well as average weekend traffic.

“The number one issue of sales floors that underperform is not having enough people staffed at the right time, and the number one way to fix that problem is by figuring out your traffic patterns and getting enough people on the floor to match them,” David concluded.

While there are countless challenges in home goods retailing that could be picked a part and put back together again, inventory management, pricing, and store traffic topped the list for this particular set of retailers. Hopefully this shed some light on how to meet these specific issues head-on with advice from an expert consultant who’s successfully dealt with them before.

To learn about more top challenges in home goods retail and their potential solutions, read the results of David’s two-year study aimed at figuring them out here.  

Contact Us

Need More Information?

Call us today at 800.888.5565 or fill out the form below.

PROFITsystems prides itself on providing the best support and being responsive to customers, prospects, and partners. Please provide the details below and a knowledgeable representative will contact you shortly.

For support related inquiries, email PSI.support@highjump.com or call 1.800.888.5564.