Aug. 17/24; Volume 30/Number 5
By David Romano
“We beat any price” and “We won’t be undersold” are phrases used by two of the largest retailers in the world. If it works for them it should work for any local flooring dealer, yet many of them are reluctant to adopt the mottos. Some are hesitant because of the competitive landscape while others are concerned about what they would do to margins that have seen a progressive deterioration over the last decade.
When a customer walks into Walmart and sees its claim, “We beat any price,” she is confident it has the lowest prices. The key is exact products; there is nothing to guarantee another retailer won’t have a cheaper 55-inch television, but the claim guarantees no one will have a cheaper price on the specific model it carries. The same happens every day at Home Depot with window clings stating it has price-match guarantees for the same product and service. And yes, it does apply to the flooring division.
Many of you will say this isn’t a fair comparison because Home Depot gets special pricing since it is so big or carries specialized lines and unique SKUs. If that is true, what precludes you from doing the same? If you are part of a cooperative or franchise group much of this is done for you, which is the great value of joining those groups in the first place. If you’re not part of one of these groups, investing in a label maker and retrofitting displays to create your own nomenclature is not that difficult.
If you don’t have the time or desire to create your own private labeling system, you can still be creative with your product offerings. Negotiate market exclusives and shop the competition to see which unique offerings are missing from the market or which lines are available that they don’t carry. If you do have an open line product that continually gets beaten, take it out of your assortment and replace it with something else.
Some say if you offer a price match guarantee you are inviting others to shop you and opening the door to lower-than- desired margins. But according to a substantiated survey conducted by Benchmarkinc in which several hundred flooring business owners participated over a three-year period ending 2013, independent flooring stores that offer a price match guarantee:
- Were over 55% larger in volume ($4.75 million vs. $3.01 million)
- Had a higher gross profit (36.3% vs. 35.5%)
- RSAs each sold nearly $25,000 more per year
- Owners took home just above $29,000 more per year
Many of our clients have adopted this policy and experienced this kind of success. Some offer the price match after the sale has been completed for a finite amount of time while others offer it when customers are still in the decision-making process. Many also offer a percentage discount from the difference of your original quote and that of the competitor, similar to the 110% price match guarantee advertised by Home Depot.
During the qualification process, imagine your sales associates saying, “We are so confident you will get the best value in town, we offer a 110% price match guarantee if you find the exact same product with the same level of service and same warranties from another retailer in our market.” All that is required of the customer is to bring back a quote from a competitor on a company letterhead.