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A Case Study of a Furniture Shop

I had been working with a couple who own a furniture shop for a number of weeks and they told me that business was bad because they were off the beaten track and people did not know where they were.

After 4 weeks we sat down and reviewed their numbers. I gave them tick sheets to count the number of people who came into their shop. In a 4 week period this number was 1,100. Oh these 1,100 only 87 had purchased an item which gave them a conversion rate of 8% (87/1,100). For their sector this can vary from 12% to 29%. When Mary and Jim saw the numbers they were shocked. I had previously asked them to estimate their conversion rate and they had said 60%. I know from experience that most people over estimate this number by a factor of 3 or 4.

Measuring the numbers had told me that their issue was not that they were off the beaten track. Their issue was that their conversion rate was too low. Of the 1,100 people who walked into their shop 1,013 walked back out without purchasing. Now you will never get 100% and with furniture people shop around and take their time but this rate was still too low.

After some discussion on the subject they told me that sometimes they would continue with admin work rather than approach a customer. I provided some sales training and within one month the rate had increased to 14% so they more than doubled their sales.

Conversion rate is one of the most important figures in a business, especially retail, so measure yours. Even if you are in a sector which is traditionally high measure your rate. For example one bar/restaurant where it would normally be 100% people were walking out of the restaurant because there was nobody to seat them.

Imagine getting home half way through a game and switching on the telly to find out how the big match is going only to discover that there is no scoreboard on the screen. During the after match analysis nobody mentions the score. This is unlikely to happen but how businesses go from day to day, week to week and even year after year with no scoreboard.

Every business has key numbers that they need to be very familiar with. The main ones across most businesses would be:

  • Weekly sales
  • Gross margins
  • Number of potential customers
  • Conversion rate
  • Number of customers
  • Average sale
  • Breakeven sales
  • Breakeven number of units/sales

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