How Much Money Do Stores Make On Furniture?
Oftentimes, furniture pieces cost thousands of dollars.
Have you ever wondered how much money stores make on furniture?
As it turns out, there is no simple answer to that question since a lot of different factors come into play when determining the profit margin for a particular piece of furniture or a particular store.
Most furniture retailers purchase their furniture at wholesale prices. Usually, that means that they purchase the products directly from the manufacturer; oftentimes in bulk. As a result, they usually are able to obtain pieces for their store at relatively low prices.
Sometimes they can eve offer discount codes. Loom and Leaf mattress is just one example, they are able to give promo codes to their customers because they get their mattresses at a bulk, (source: http://loomandleafcoupon.org/ ).
Instead of turning around and selling the products at those prices, however, they have to build in a profit margin. That usually means marking up the price significantly higher than the price that they paid.
Oftentimes, they double, triple, or even quadruple the wholesale price of the furniture, providing plenty of room for them to earn a profit.
Even though this might seem like a rip off from the point of view of a customer, they probably aren’t making quite as much profit as it seems. There are a lot of expenses associated with running a furniture store aside from the cost of purchasing the furniture.
For one thing, they need a place to keep all of the furniture. Many furniture pieces are extremely large and bulky. Huge overstuffed couches, king-sized beds, massive dining room tables, and other large pieces require a lot of square footage. That means that they need to rent large showrooms where they can display the furniture.
Most retail spaces charge based on the square footage that they offer. As a result, furniture companies usually have to pay a lot of money to rent a space where they can sell their furniture.
This cost has to be covered by the money that they make each month on sales, meaning that they have to mark up the price of the furniture higher than they would if they didn’t have to pay rent.
Furniture sales are also a little bit slower for brick-and-mortar companies right now, largely due to the fact that so many online furniture retailers have entered the market. Since many people buy their furniture online, companies that have physical stores have seen a decline in sales. That means that they need to earn more money with the few sales that they do make in order to cover their costs, forcing them to charge higher prices.
Sometimes, they may even have to sell furniture at a loss. For instance, new mattress models usually come out once a year. If a store sells mattresses, they need to clear out their existing inventory before they can bring in the new models since there is limited floor space available. In some cases, they have to lower the prices below what they paid in order to get rid of the items so that they can bring in new inventory.
As you can see, there are no cut-and-dry answers when it comes to how much money stores make on furniture sales. It not only depends on how much the stores decide to mark up the prices but also on other expenses that they need to cover.
All of their expenses have to be subtracted from their sales to determine their total profit. The higher their expenses are, the more they need to charge for their furniture to cover their costs while still earning money for their business.