We Can Talk

[baileyuph]

We have discussed a good bit about marketing, technologies used in producing furntiure, and some about "how to" or "don't do" techniques.

Now, an associated thought is cost of production at the manufacturing level, specifically what would be an estimated cost to the retailer of a new $600 sofa sitting on the show room floor?

I wonder because often and very soon afer sold, it ends up with a service request that is covered by someone, the retailer or manufacturer, and can run a few dollars.  Seeing this going on, I have to be curious about how can the stuff be sold so cheaply and be covered by a warranty?

Therefore centered on these thoughts, is the question of just how much did it cost to build this stuff.  It must be lower than I surmise because vendors would quickly go out of business selling so cheap and providing warranties. 

Hence, retailers must have considerably less than 50% of the example item,$600,
as their actual cost. 

Without naming companies, are there any reliable estimates of what retailers actually pay for the low end furniture?  Like I say, it is a miracle that they can handle the stuff and stay in business.  We all pretty well know it is cheaply made, that isn't the issue, my gosh, just how cheap is it to the store?

It must be REAL Cheap, which now makes me wonder just how cheap, per hour, is foreign labor?

LOL

Doyle

[sofadoc]

I have a close relationship with a local furniture store manager. They sell sofas generally in the $600-$900 price range. From what he tells me, I'd say that you're pretty close in saying that their wholesale cost is less than half.

What befuddles ME is; I can look at that $600 sofa, and figure what it would cost ME to recover it. Just MY cost for foam and fabric, and paying myself minimum wage alone is around $600. And we haven't even talked about frame, springs, etc.

[crammage]

Having designed furniture that was manufactured I can tell you that the wholesale cost on my chair was 298.00 and the suggested retail was 849.00.  Most of the retailers marketed it in the 600-700 range.  I've also attended the home furnishings show in Las Vegas a couple of times and can tell you that the suggested price was usually based on a 50-75% margin.

Clay

[byhammerandhand]

I once overheard the owner at one of my customers say (in the back room),  "The MSRP has a 200% markup, but we discount 40%, which is like a 100% markup for us."

Happy to say that her husband was the business manager, and hoped he realized this math didn't work out like she thought it did.

I'd hate to think of how she got confused over a 50% margin is a 100% mark-up.

[gene]

I've heard the average mark up on furniture was 200% to 300%. This is why Cosco and other such companies sell furniture: the mark up was big enough to be worth their time to mess with it.

I was told last year by a furniture store owner that furniture mark ups are less than that today.

A family friend bought two straight back chairs last month that I covered the seats. The chairs were marked at $165 and she got them for $90 each. She said the store owner paid $25 each for them but she didn't care - she liked the way they look.

Regarding sofaD's comments: When I sold packaging materials, (these numbers are an example, I don't remember the exact numbers but these numbers make my point), I could sell the exact same box for 25 cents each or 3.75 each. If we set up a machine and ran 75,000 boxes it would be 25 cents each. If we ran that same machine for 250 boxes, it was 3.75 each.

We wanted to run the big orders so we could also make money from our paper mills - we were running more paper. We wanted to run the short orders because they had more profit margin.

gene

[kodydog]

When I worked in manufacturing in the 80's we had an 8 person crew upholstering 28 to 30 sofas a day. 6 cushions with skirt. When the sofa was pushed to the front of the line the fabric was cut and sewn and the cushions were stuffed. This seems like a daunting task for an eight man crew till you break it down assembly line style. My position was inside arms. That meant 4 pair of inside arms every hour. Same for the girl putting on the deck/seat front, 4 an hour. And the inside backs (some styles were simi-attached), 4 an hour on down the line to the guy attaching the skirt. Back in the 80's the average pay for a factory worker was around $6 to $8 per hr. So it cost the factory about $448 to upholster 30 sofas or nearly $15 per sofa.

Of course this doesn't include the cost of the frames, the sewers time, spring up, materials or overhead. But at the end of the day 30 sofas were wraped and ready for delivery. You can see where I'm going with this. The factories have figured how to do it cheep, cheep, cheep by keeping costs at rock bottom.

Now you could say, but Ed that was nearly 30 years ago, wages have gone up and furniture prices have not. And I would have to disagree. I doubt anyone in China makes close to $8 an hour. But I've heard wages are on the rise there, and as they do more jobs will be coming back home.

I can easily see how a factory can build a sofa for less than $200. What I can't figure out is how do they ship it all the way from China, with energy prices where they are and still wholesale it that cheep.

[west coast]

The uph furniture mark up is definitely 200 - 300 percent. By the container load there is an allowance for waranty built in to the number of pieces in the container. In the old days all claims were sent back to the manufacture from the retailer now its built into the container load based on averages. If you think uph furniture is bad for mark up look at mattresses.

[Mojo]

I was told by a close friend who sold furniture that the markup is huge 100 - 200 %.

Ed in regards to your comment manufacturing is starting to come back to the USA due to shipping costs which is due to fuel. The margin for Chinese production is shrinking. Fuel prices plus pressure from the Chinese public on wages is slowly erasing their competitiveness in manufacturing.

I believe it was one of the big appliance manufacturers who just moved production back to the USA. One other thing is that manufacturers are finding the distance between engineers and production hurts them.

Back to the topic. I always knew there was a big markup on furniture. I believe though that the margins have slipped a little like everything else.

Chris

[Mojo]

Doyle:

I do not know you......never met you....but you strike me as a man whose mind is constantly turning. You must be a real inquisitive and hard thinker. Your posts reflect this. And BTW I like that in a person. It is a good quality.

I drive myself nuts sometimes by thinking to much. But you come up with some awesome topics that makes me think even more. Thank you,

Chris

[sofadoc]

Finance charges also drive margins way up.

When Gene walks into Wild Bill's Bargain Bonanza, he immediately starts whining that he doesn't have $600 to pay for a sofa. So they sell it to him on credit.

Most stores don't handle their own in-house financing anymore. They sell Gene's notes to a 3rd party lender.
That lender may pay $900 or more for Gene's $600 note.

Of course, they make it up on Gene by charging astronomical interest rates.

Then when Gene falls behind on his payments, they charge even more.

Eventually, Gene's couch winds up at the local landfill, and he still has 22 payments left.

The finance company sends Guido out to break Gene's legs. Now Gene can't work, so he needs even MORE credit.
Vicious cycle. :D

[gene]

Let's get the facts straight, sofaD.

Gene was whining BEFORE he walked into Wild Bill's Bargain Bonanza because Gene's wife made him go with her to  buy a new sofa.

gene

[Rich]

That's why I like this forum ;D

[baileyuph]

Interesting data provided Kody.

32 sofa frames covered in a day, plus framing time, and sewing time.  It would be interesting to know those times. 

That is a lot of work for 8 people just installing the fabric to frame and filling cushions.

Efficiency does increase by performing specific functions at certain assembly line points and each worker specializing. 

In my custom business, it is apparent how much more efficient we become by doing near the same thing over and over. 

Leads me to the question, how many of our small custom shops could survive on doing repetitive work?

I don't believe I could survive by just doing a certain type of reupholstery on the same or near the same item.  For example boat seats, I don't get enough boat seats even close to the same to dedicate that work to the shop or have one worker only do that.  There simply isnt enough of that type of work to specialize like Kody explained in the furniture factory.

All that given, it clearly explains why "repairs" are usually the most efficient and most profitable functions we do, in my business.  It would be nice if there was some product that a small shop could do in volume, it would keep an employee busy and looking at Kody's example, and potential for profits.  "The adage, find something you can do quick and do a lot of it", is encouraged again and again.

Is there any information about small shops specializing in reupholstery?  If they do, it would seem they are more like a small manufacturer. 

Doyle

[Mike]

I used to work years ago in a office furniture wood shop  tables cabinet decks ect as you could find in a office and waiting room .  each work order card had a figure on it ant each person had a certain amount they had to produce each day.  I was a dept head of one of the table departments. and at one time I had to operate with a short crew.  everyone used to do one work order at a Time I BROKE DOWM all my order and made part plans on what had to be cut total so I cut all the pieces first before they were built I ended up producing 3 times a day what I had to.
so there had to be a good markup if they did well at 1/3 of what could be produced, 

I still do this cutting all the parts for a piece before I sew I can fit the most pieces like a puzzle and save material and I will out produce my brother 2 to 1

[baileyuph]

I still do this cutting all the parts for a piece before I sew I can fit the most pieces like a puzzle and save material and I will out produce my brother 2 to 1

Interesting point Mike.  I can identify with combining similar tasks and do them .

Sometimes I am able to have more than one machine set up for a project where I use  different machines rather than one machine to avoid making changes to one machine.

Merely move to the machine already setup for the specific process needed to accomplish.

Over time the time saved is significant.

Yesterday I needed three different feet for a job, so three machines were set up but only once, imagine all the changing to do the different feet on one machine.

Also rather changing staples in a gun, more efficient to have more guns (one for a specific size).  One can bet in a factory setting, work is conducted similarily.

Doyle