Here is a continuation of our comparison and analysis of the information learned from the 2006 SUPPLY HOUSE TIMES Showroom Survey vs. the 2003 version.
The 2006 survey results were published in the September issue of SUPPLY HOUSE TIMES, and a portion of the comparison and analysis was published in Part II of our coverage in October. This is the third and final installment.
Comparison And Analysis
Talking DollarsHere's one that really mystifies me! The survey asked: “Estimate your showroom operating costs as a percent of total showroom sales.” Seventy-six people responded. I believe this was a low number because a lot of businesses don't treat the showroom as a separate profit center and they just didn't know the answer to the question. What a shame! But, putting those personal thoughts aside, the responses were: 17% said less than 10%; 29% said 10-19%; 36% said 20-29%; and 18% said 30% or more. The less than 10% numbers just can't be! It costs more than this to operate a showroom. I find the 29% in the 10-19% range doubtful also. If your operating expenses as a percent of total sales are over 30%, then your bottom line isn't going to be very attractive unless your gross profit margin is 35% or more. I believe the right percentage is 25% plus or minus.
Average monthly sales volume from all of the companies' showrooms were: less than $80,000 per month - 37%; $80,000 to $300,000 - 36%; and $300,000 or more - 27%. This was a new question, so no comparison is possible.
Here are two of my favorite questions: 1) “Are your showroom operations profitable?” Ninety-one percent replied yes! 2) “How do you know they're profitable?” Fifty-seven percent replied that “we isolate showroom sales and expenses from the rest of our operations so we have the hard data to prove it.” That means 43% of those people responding don't really know if they're making money or not. What's with that! You invest a lot of money into a showroom and you don't know if you make money? I bet if you invested the same amount of money in the stock market, you'd know if it was a winner or not. Why not the showroom?
And here's another beauty! The survey asked, “Which one of the following is the primary reason why you operate a showroom?” Would you believe that out of 137 respondents only 31% (42) said they did it for “bottom line profitability?” Oh my goodness! Whenever you invest money in a business it should always be with the intent of making a profit. That sounds a bit Republican, doesn't it? It wasn't meant to be - it's just good business.
The final question in the survey asked people to list the things that need to be done to improve showroom profitability. There were a number of items listed, of which the top three were: 1) promote more aggressively to builders and designers (67%); 2) promote more aggressively to consumers (42%); and 3) improve staff selling techniques through training (40%). I really liked all these answers. Hurray for these folks!
There you have it: Some great benchmarks, guidelines and information against which you can compare your business - use it to your benefit. The survey shows that wholesalers really are starting to embrace showrooms in a very positive way. That puts a smile on my face! Keep up the great work!