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Darren Taylor | COMMENT AND OPINION


DARREN TAYLOR


OPINION


The managing director of Searle and Taylor has some tips to help retailers protect their margins, plan for the unexpected, and spells out how suppliers can avoid making matters even worse


Always write in the margins


you and your staff get paid every month and to invest in making their showrooms better and more beautiful to provide a fantastic experience.


A


I want to work with suppliers who will also provide me


with great support and a half-decent margin, so that I can make a profi t


Retailers have a lot of people to please. We have to make sure that our end-user clients are ultimately happy. It is the retailer’s name above the door and the buck stops with them. Our business requires a lot of meetings. We are not just selling a vase or table. We are designing the dream kitchen that the customer is going to live with for many years – the one they’re going to tell their friends about and then recommend the amazing service they received, which keeps my business profi table with new orders. But we have to keep to the rules and regulations set by suppliers who want us to dedicate our entire showrooms to their products, actively telling us which brands we can and can’t include, and threatening to de-list us if we don’t comply with their demands. They have a price list with a margin of discount that we work to and, if we are very lucky, we get to be a Premium Retailer, or similar. Those margins are what we are able to keep when we


sell products on their behalf and what helps us retailers stay in business and hopefully make a profi t. Furniture is key and is where most profi t is made. I retail bespoke furniture, so I always know my profi t margins and can rely on the supply. I also work with furniture suppliers, who are on the whole great, but they need to understand two things. First is that if you de-list a range that you only launched two years ago, it means I have to remove it from display, which eats into my profi t margins. The second is that if you don’t deliver on the agreed date, then it is me that has to explain that to my client, who is expecting their kitchen to be installed, and also to my fi tters who still need to be paid


Foresee the unforeseen


Understanding gross profi t is a very useful way to keep ahead. I recommend you carry out a GP sheet on every job. Sell a kitchen for £15,000. Cost to buy in everything is £10,000. You should make £5,000 gross profi t. This is a 33% GP. But that


September 2019 · kbbreview


does not take into account the bit that they don’t teach you at business school – the unforeseen. The oven cost £600, but then there was a price increase


to £700. The sink you sold has been discontinued, so you upgraded to another that looks the same – at £50 more. The tap arrived but it was the wrong fi nish,


ny retailer knows it’s never enough to break even. In the precariously unpredictable times over the past few years, a lot of businesses couldn’t even do that. Being profi table is the only way to ensure


even if they are not doing anything – bye, bye profi t. We all know that appliances do not provide the fantastic


margins they once did, but there are ways that premium brands can help retailers remain profi table. The fi rst is to extend the lead times for your price increases. When sterling tanked after the Brexit referendum, a number of suppliers made overnight price increases, blaming the rising cost of materials, and we have had further ‘immediate’ price hikes since then. Businesses need time to factor in any price increases in order to rework their margins, especially in our industry, where you quote and sell a kitchen often weeks before you order in the appliances. The second is something completely different, but sadly true. Those appliance manufacturers that have experiential showrooms need to urgently train their staff that if a customer is sent to them by a specifi c retailer, then that person is always the retailer’s customer, not theirs. That customer is sent there to receive a demonstration of appliances that will then be sold by the retailer, with prearranged discounts in place. That customer is never to be offered prices that undercut the retailer. All this does is reduce the retailer’s margins to precisely


zero and it gives the brand a bad name. The internet situation is still bad enough for all of us, but when you have actively sent someone on a trusted recommendation, it is galling, and it has happened to me, recently. So, what makes me, the retailer, happy? Being a truly independent kitchen specialist, I want to be able to offer my clients an independent approach and let them come to my beautiful showroom to choose from a stable of premium products that I know they can rely on. I want to work with suppliers who will also provide me


with great support and a half-decent margin, so that I can make a profi t, invest in my business and make everyone else happy, too.


but the fi tters didn’t realise, so they fi tted it anyway. Now you can’t return it and have to order a new one at £200. You defi nitely ordered the correct amount


of plinth, but the fi tter calls to say there isn’t enough. So you have to buy a new length at £50. You forgot to order a cutlery tray – another £30. The driver for the


LED light has gone missing – that’s another £30.


The client has had an attack of bad taste and wants two handles instead of one on each drawer. You threw in the fi rst set of expensive handles to close the deal, so it would be churlish to charge for the extra ones now: £300 later… Total unforeseen cost is £760.


Margin dropped to 28%. Always expect the unexpected and foresee the unforeseen.


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