Member Matters: The Case of the Appliance Alliance

Should a furniture dealer add appliances to the mix?

YSN Staff

This week the Member Matters team offers advice on entering the white-goods biz.

THE PROBLEM
“I own a successful furniture store in the Great Lakes area. We are located in a small town and have built a loyal clientele that likes to shop locally.

“I’m considering adding appliances to my merchandise mix. My current location is 8,000 square feet with room to expand. Although there’s smaller margins in this category, I believe it could give our current customer base another reason to visit my store.

“I have the funds available to provide any additional infrastructure needed to fully service my appliance customers. What advice can you provide to help me be successful?”

THE PANEL
Daniel Abramson is managing lead of HRSource, authored two books on hiring and business success, and was president of an international search and staffing firm with 120 locations.

Gordon Hecht is an AVB consultant and former retail salesperson and multi-store manager who oversaw large swaths of retail shops for Ashley and Serta.

Rich Lindblom was a longtime appliance store owner and BrandSource member who is now an integral part of the group’s ARC POS team.

THE PROPOSALS
Lindblom:
While appliances may not be as profitable as furniture, they certainly are worth selling if your company has the capacity to do so, for several reasons:

1. Adding appliances to your product mix will draw more foot traffic to your store. People who have never shopped your store for furniture before may shop your store for appliances, thereby growing your customer base. 
2. Appliances take up less space and turn faster than furniture, thereby generating more revenue per square foot.
3. Appliances have a shorter life span than furniture, meaning more frequent replacement sales. The average appliance is replaced every seven to 10 years, while the average sofa is replaced every 15-20 years.
4. Appliances also generate more extended warranty sales than furniture, adding 10 points of margin to a typical sale. Because they need repairs — as opposed to furniture, which does not — appliance shoppers are far more likely to purchase an extended warranty.
5. Finally, because appliances do need repairs, you can add an entirely new revenue stream to your business if you have the capabilities to perform service well. With the exception of warranty work, appliance repairs are highly profitable, with margins typically exceeding 50%.

The bottom line is that if you have the showroom and warehouse space along with the personnel to do the work, adding appliances to your mix is a no brainer.

Abramson:
While appliance margins are typically lower than those on furniture and mattresses, appliances can still be a highly strategic category for several key reasons.

First, appliances generate steady foot traffic. Unlike many furniture purchases, appliances are often necessity-driven and purchased year round, giving customers another reason to visit your store regularly and keeping your business top of mind.

Second, appliances position your store as a complete home destination. Many customers prefer buying furniture, mattresses and appliances from one trusted local retailer, rather than traveling to larger cities, shopping big box chains or visiting multiple stores.

Third, appliances create valuable cross-selling opportunities. Appliance customers frequently purchase financing, delivery services, protection plans, mattresses and furniture at the same time, increasing the total ticket size and strengthening long-term customer relationships. In other words, it creates more opportunities to serve the customer across multiple categories, giving you more bites at the apple!  

Finally, your current 8,000-square-foot location with room to expand gives you the flexibility to add appliances without compromising your core furniture business. Just as important, you already have the financial resources to invest in the delivery, warehousing, inventory systems and customer service infrastructure necessary for success.

BrandSource members who succeed in appliances are not always the lowest priced; they are the ones who deliver trust, convenience, service and strong local relationships. Good luck!

Hecht:
There are two steps to success in retail today: First, create more footsteps for your business, including online traffic. Second, sell products with higher margins. Adding appliances will give you a new income stream, albeit at lower margins than you are used to.

Here are a few recommendations once you decide to move forward:

Start with niche brands, those you may not find at big box competitors. You don’t want to fight the online pricing battle. Next, look for ways to keep a tight inventory, brands that can ship quickly. Before selecting your merchandise, confirm that the suppliers can deliver on the training, part, service and advertising support that you’ll need to be successful. 

Personnel will be integral to your success. Ensure that your delivery team has the skills and tools for appliance delivery. You may have to begin by contracting technicians, with a long-range goal of having a profit-driven appliance service department. You may have to seek a resource for disposal of old appliances, too. 

When you’re ready to launch, contact every one of your past customers with a special offer. They already know and trust you. More than a few are likely to be in the market for a major appliance. Then kick off your gallery with a grand opening event. Continually promote cross-merchandise events that tie furniture, mattress and appliance offers together, and you’ll become a true one-stop showroom.

Got a workplace predicament? While we can’t offer legal advice, send a note to YourSource@brandsource.com and we’ll have the Member Matters team address it.

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