April 27/May 4, 2015; Volume 29/Number 2
By David Romano
The perplexing dilemma of whether to lend samples in the flooring industry is the source of much heated debate, with many owners ready to argue their sides until they are blue in the face. Some will say that lending samples is an open invitation for customers to shop the competition to get a lower price. Others will say if they don’t lend samples, customers would get upset and choose to buy elsewhere.
Some flooring companies have taken the validity of both arguments and reached a compromise. Samples are being brought to the home by the sales associate, shown in the true environment and brought back to the store at the completion of the measurement. If the customer needs samples for matching paint or fabric colors, up to three samples are ordered and given to the customer at no cost. Many manufacturers ship samples to the customer at no additional cost to the store. This process eliminates the issue of samples being checked out and never returned as well as the need to buy more samples to have backups of more popular items. This process, although a bit restrictive, is still customer centric while protecting margins and keeping products out of the hands of the competition.
Data gathered from a substantiated survey conducted by Benchmarkinc, in which several hundred floor covering dealers participated over a three-year period ending in 2013, yielded some valuable insights:
Total volume (total net sales):
- Nearly $1 million greater than average for those who don’t lend samples
- Nearly $1.1 million greater than those who do lend samples
Gross profit (generated after direct expenses):
- 38.4% for those who do not lend samples
- 35.4% for those who do lend samples
Sales productivity (generated by each full-time equivalent that sells):
- $16,000 less for those who don’t lend samples vs. those who do
- $15,000 less than average for those who don’t lend samples
Close rates (percentage of total opportunities that turn into a transaction):
- 3.9 points less overall close rates for those who don’t lend samples vs. those who do
Owners’ salaries:
- Owners who don’t lend samples earned nearly $32,000 more than those who do and about $30,000 more than average
Cost of samples:
- Stores that don’t lend samples spent about $11,334 on samples and displays (representing .26% of net sales)
- Stores that do lend samples spent about $12,858 on samples and displays (representing .39% of net sales)
One could argue that not lending samples has a negative effect on close rates and sales productivity. On the other hand, one could also argue that it results in a higher gross profit, lower cost of samples, higher sales volume and makes more money.
If by not lending samples an owner generates an additional $1.1 million in volume at a 38.4% gross profit, he would experience a gain in gross profit dollars of $422,400. After taking into account the lower close rate, decrease in sales productivity and affect on traffic, the practice of not lending samples is still the clear winner in this battle.
For those of you who are planning to change your policy and not lend samples, making a hasty switch to a new policy could have a negative affect on sales and customer service. It’s highly recommended that RSAs are thoroughly trained on the new policy and are taught how to handle objections or challenges faced when dealing with customers.