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Research from Fortune Business Insights reveals the global furniture market in 2021 is $493.6 billion, and it is projected to post a 5.5% compound annual growth rate (CAGR) to $720.2 billion by 2028. The positive outlook for the future of this market has raised the question “How profitable is furniture business?” among those who want to operate in this industry. In this article, we’ll go through this question, and give you suggestions on how to improve your furniture business, as well as the latest furniture industry trends.

How profitable is furniture business?

How much profit do furniture stores make

Let’s dive into the 3 most popular questions about the profitability in furniture industry.

Is selling furniture profitable?

According to The Retail Owners Institute, the gross profit margin for retail furniture stores has declined slightly from 45.2% in 2017 to 43.1% in 2021. However, pre-tax profit margins have recovered substantially to 5.4% in 2021 after reaching its bottom at 3.7% in 2019.

In general, you can expect the average gross profit margin over 40%, while the pre-tax profit margins vary between 3% and 6% depending on the marketplace fluctuation.

How much is furniture marked up?

The markup on furniture is the difference between the retail price of a product and its wholesale cost. Typically, the average markup of furniture ranges from 20% to 50% based on the furniture’s wholesale cost. Furniture retailers use markup to cover their operating costs including employee salaries, rent, utilities, marketing costs, and other overheads, while leaving a portion for profit.

How can you improve your furniture profit margin?

If your profit margin is lower than the average number of how profitable is furniture business, you can improve your profitability in 2 ways: raising revenue and reducing expenses. Here are some tips for you:

  • Reduce operating costs: This includes office space and utilities, employee spending, equipment repair, and business software. Try to negotiate a lower rate, or remove any unnecessary services.
  • Focus on higher-margin furniture items: Use the break-even analysis to determine if a product is truly profitable. Cut underperforming products and add more high-margin products.
  • Test your pricing strategy: Try different pricing approaches such as value-based pricing or cost-plus pricing and measure their impact.
  • Build brand loyalty: The cost to get a new customer is more expensive than the cost to retain a current one. Engage with your existing customers and create loyalty programs for them, you can save more advertising costs.

Characteristics of a successful furniture business

Characteristics of a successful furniture business

After knowing how profitable is furniture business, if you want to open a new furniture store, you can start by learning from other successful businesses in the industry. Here are the characteristics of a successful business:

  • A fresh inventory: Having an up-to-date inventory will keep customers interested to explore new products and the latest trends. It also indicates that this store doesn’t have obsolete items hanging in the store and is making a good sales performance.
  • High-quality furniture pieces: A good furniture store provides high-quality items that will last for a long time. The pieces of furniture should come from quality materials and be produced by reputable manufacturers with a high standard.
  • Well-trained staff: The store’s staff should be helpful and have a deep understanding of what they’re selling. They should be able to give you suggestions and find the best-suited products for customers.
  • Digitalization for efficiency:
    • Use a POS system for furniture to automate processes and eliminate manual tasks.
    • Manage inventory accurately with barcoding and serial tracking.
    • All data from products, sales, inventory, and customers are connected to ensure consistency.
    • Design room sets with room planning software.
    • Analyze customer behavior and use marketing campaigns to target different customer segments with personalized offers.
  • Well-managed financial health: Great furniture retailers understand their Gross Margin Return on Investment (GMROI) and implement the “SMART” steps:
    • Spot the winners: Identify the products, salespeople, and marketing methods that contribute to 80% of the gross margin amount.
    • Maintain the winners: focus on the 80/20 mindset.
    • Auto-identify to handle stagnant items.
    • Reward high gross margin sales: Pay a higher commission for higher-margin products to encourage sales.
    • Target marketing offers to your customers: Personalize content and suggest suitable products for their needs.

How to improve your furniture business?

How to improve your furniture business

Here are what you need to pay attention to boost sales in the furniture business:

Step 1: Recognise customer’s needs

Before jumping on anything, you must understand your customer’s needs. Find out your target customers, their pain points, their desire, their expectation of your products and service, as well as the price they’re willing to pay.

Knowing these aspects, you can create buyer personas. It is a thorough description of your ideal customers, including the problems they confront and what they want from a solution.

Step 2: Deliver an omnichannel experience

Customers now expect to be served anywhere they can find you. Omnichannel has become an essential feature for furniture businesses to increase sales. Therefore, your store has to operate seamlessly across all channels, both online and offline, providing a consistent experience for customers. You can use the O2O approach to get customers via advertising and product display methods, then entice them to visit the showroom.

Step 3: Engage with customers via social media

Today, customers seek an engaging experience, with social media being the top platform for engagement. Try to leverage social media in your furniture marketing plan. After determining the target audience and their favorite social network, you should aim for engagement that can make your brand stand out, increase awareness, and connect with customers. Some tactics for this include:

  • Provide information about the products and industry that is instructive or amusing;
  • Recognize customer pain points and suggest a solution;
  • Create high-quality and shareable photos or videos with storytelling a style that addresses customer challenges and solutions.

Step 4: Pay attention to the website

Website is an important touchpoint to show what a business can offer. Having a fast, well-designed website with eCommerce features not only creates a good impression, but also drives online purchases. Ensure your website is up to standard for eCommerce, and able to showcase products in an interactive way. Here are what you can apply to create a user-friendly and convertible website:

  • Create life-like pictures of the products by using ImageScripting and 3D modeling, offering customers a 360-degree view of the items;
  • Showcase the items in great detail with a variety of styles and colors to assist consumers in making purchasing decisions;
  • Add categories and search options on all pages to help visitors find what they want as quickly as possible.

Step 5: Train your sales personnel

You should train your sales representatives to ensure:

  • They have deep knowledge of furniture products;
  • They’re kind, helpful and have strong communication skills to consult customers and build connections with them;
  • They can use software to make their job more efficient, for example checking for the availability and the location of items, and quickly serving customers during checkout, shipping, or return.

Step 6: Provide excellent customer service

Customer service is crucial to make customers happy and keep coming back. Make sure that your furniture business creates an experience that exceeds consumers’ expectations. This establishes a long-term relationship based on trust and loyalty, which will lead to future sales. Speak properly and answer customer queries as soon as possible.

Step 7: Offer a speedy and pleasant delivery

Most furniture needs delivery service. This is the final point of contact with customers, and you want to close the shopping journey with a smile from your customers. Some advice for your delivery service are:

  • Agree on a delivery day and time with customers in advance;
  • Require your delivery personnel to be well-dressed and courteous;
  • They should handle the furniture properly, and have tools ready to solve minor issues, such as touch-up pens and screwdrivers.

Furniture industry trends in 2022

Furniture industry trends in 2022

The furniture industry is ever-changing in terms of products and the selling methods which requires brands to keep themselves updated on new trends and customer demands. Let’s explore the upcoming furniture trends in 2022:

1. The rise of eCommerce thanks to technology

Although many furniture brands have their own websites, most of them are designed to drive customers to the physical stores rather than making a direct online purchase. Today, customers are switching to online shopping for furniture products thanks to the implementation of an innovative and appealing way to showcase the products. Taking advantage of new technologies such as ImageScripting, WebAR, and product configurators can provide realistic online visual merchandising. Thanks to this, customers can easily find the perfect piece without leaving their homes, and in turn, encourage more online sales.

2. Fast and free shipping

Free and fast delivery is now expected as a part of the norm. This is common in other retail industries like clothing and groceries, and now the furniture industry is catching up. More and more brands are offering shipping on the same day with no extra cost to remain competitive. This is especially true as millennials are now the largest furniture-buying demographic, and they want to buy and get their furniture home within a day. 

3. Easy and various financing options

Financing is common for high-valued furniture, and customers are requesting more financing options that meet their convenience. They expect to have easy and quick financing approval for both in-person and online purchases. This is also a component of a CX that you must not miss. If customers aren’t happy with the payment and financing options you offer, they may go to other stores that better meet their needs.

4. Focusing on personalization

Personalization is an essential component of CX. You should provide customers with personalized suggestions and guidance for them to find the perfect furniture piece. To do that, applying an omnichannel approach with unified data across all channels is a must. You can then build customer profiles, knowing their behaviors and preferences to offer the best-match products. This creates an environment where customers are offered relevant and helpful information to keep exploring the brand along the customer journey.

5. Meeting SCR (social corporate responsibility) concerns

Sustainability is predicted to be a large concern among customers, and the furniture industry is also a part of the trend. Brands are aware of how their chosen materials and production impact the environment, as well as the salary and treatment of their workers. The trend now favors sustainable furniture products that are built from environmental-friendly materials with high durability. Customers are willing to spend more for products coming from a brand that shares their concerns for the environment.

6. The need for smart and remote office furniture

As more people are choosing remote work, demand for smart furniture and home office furniture also increases. Customers are looking for something stylish, functional, comfortable, easy to assemble, and quick to ship. They also pay more attention to smart furniture, which has various functions such as browsing the Internet, charging mobile devices, listening to the news or podcasts, and more. This niche market is rapidly growing in 2022 and beyond, since the remote workforce is forecasted to stay rather than just a temporary event.

7. Tech-savvy, fully-trained staff

Sales personnel and floor staff are required to be completely knowledgeable about the furniture products, and able to make use of hand-held gadgets to engage with customers promptly. For online customer support personnel, they need to provide customers with accurate information quickly whenever they ask. You can set up omnichannel support and a centralized system to provide all staff with the necessary information to best serve customers.

FAQs

1. How do furniture stores make money?

Furniture stores create income by selling furniture products. They buy furniture items from factories at wholesale prices, add a markup, and then sell at a higher price, netting a profit.

2. What is the profit margin on furniture?

Another same question is “how much profit do furniture stores make?”. To answer, the profit margin for retail furniture stores in 2021 was 43.1% for gross profit margin and 5.4% for pre-tax profit margin.

3. What are the types of profit margins?

There are 3 main types of profit margins and here are the formula for each:

  • Gross profit margin = (gross profit ÷ revenue) x 100, in which gross profit = revenue – cost of goods sold;
  • Operating profit margin = (operating profit ÷ revenue) x 100, in which operating profit = revenue – cost of goods sold – operating expenses;
  • Net profit margin = (net profit ÷ revenue) x 100, in which net profit = revenue – cost of goods sold – operating expenses – interest – taxes.
Katie Nguyen

Author Katie Nguyen

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