Browsing through the competition, I was astounded to read a column about “trading dollars,” a practice when there were 30,000-plus flooring stores. Many marginal retailers who believed the only way to sell is with price and needing cash would give away merchandise at cost to finance the next order. Theoretically, this practice can work if you can sell more each and every week—the bills finally coming due after your demise.
One of the few benefits of this bad economy is retailers who think like this are largely extinct. The fallacy of selling price is no consumer can tell the value of flooring. Walter Guinan, the late chairman of the world’s most successful carpet mill, once stated: “If I slapped a piece of carpet on the table at a meeting of mill presidents and owners, not one of them could tell what that carpet is worth. If the people who own the mill don’t know the cost, how do retailers expect a consumer to know?” Hard surface is even tougher to evaluate.
“All buyers are liars!” is an old cynical saying by old cynical salespeople. Consumers don’t lie. They are all just the very worst negotiators. When they say, “I saw the same thing at a better price at the other store,” it’s 99% sure they didn’t see the same thing. Many retailers believe them making them worse negotiators than their customers. It is impossible for consumers to judge turns per inch, nylon type, solution-dyed, stitch rate, face weight and the hundred other factors that go into the cost of carpet.
Nowadays, if your competition is a chain store or member of a retail group, their products don’t have the same name on them. If you are a member of a group, they can’t shop your merchandise. Of the flooring retailers still in business, only 10% to 15% of all sales are sold by dealers so unsophisticated as to not private label merchandise. The bottom line: giving away flooring is not only a sure fire path to bankruptcy, it isn’t even an effective means to sell.
Perception is reality. The highest volume stores sell at the highest prices. Every week a local furniture store has a one- day only sale of the century. One of its sales was three rooms of carpet for $399 completely installed. In reality, a consumer would be lucky to get three rooms for $2,500. The big boxes have free installation or whole house installation for $39. Actually, their installation is far more expensive than yours. This column is too short to explain the details.
While you should never worry about the competition, you should know what they are doing. It’s imperative retailers find out how, why and what the competition is doing.
Car dealers are the ultimate illusionists. They operate on a “four square”—MSRP, interest rate, monthly payment or trade-in—so they find what is most important to their buyer and work on that. Want low interest? The trade-in allowance goes down. Want a discount off the MSRP? The monthly payment goes up or any combination of the four. Buyers who believe they are expert negotiators are always the easiest to fool.
Bottom line, people buy from people they like. Selling is the art of being liked, so training is of paramount importance. If they don’t like you, price is the important factor. In tough times with fewer customers, it’s important to sell at a higher price. Another point to consider is the only people who don’t have money during a recession are poor people, so it is only common sense to promote to a higher income clientele.