HIGH POINT — Furniture retailers facing a well-documented inventory glut are looking to protect margins by honing their logistical and back office efforts to counter carrying costs and mitigate the impact of potential discounting on hard-won price increases.

The challenge is striking a balance between demand realities and ensuring adequate supply of the right goods at the right time. The problems are known, but what are retailers doing to avoid losing money on product just to get it out the door?

Several retailers discussed what they’re doing operationally to deal with inventory challenges and changes they’ve made in their approach in their own logistics operation to improve efficiency, save money, offset higher costs and insulate from too much heavy discounting.

Exclusive Furniture’s problem is typical for retailers. CEO Sam Zavary said offshore manufacturers loaded the store all at once with 15 to 18 months worth of orders, leading the eight-store Houston-are retailer to sort purchase orders according to whether goods were ordered for stock or for sold merchandise.

“We’re only getting the stuff we really need or that we’re running out of, ordering only on an as-needed basis,” he said. “We’re cancelling a lot of POs we don’t need,” adding that while vessel space is freeing up and costs per can are falling, imports are still taking quite a while to arrive. “We have a lot of furniture in the warehouse that’s very expensive because of freight (cost) had been so high.”

Exclusive also held off on a lot of re-merchandising. “We didn’t make decisions on new product at April market because we need to move what we already have,” Zavary said.

He described deep discounting as meaning one thing: “The company isn’t making money.”

“Still, you’re sitting on overpriced inventory, and our No. 1 goal is to get lean and healthy again; that’s all we’re working on right now,” he said. “You might have to put on special what you have a lot of.”

Exclusive’s move to expand its warehouse in 2019 to accommodate future growth paid off in the current environment.

“In October 2019, we leased a big warehouse for future expansion,” Zavary said. “We needed 100,000 square feet at the time, but we moved into 176,000. Call it luck.”

While getting an overstuffed warehouse cleared is Exclusive’s absolute priority right now vs. logistics, Zavary did say the store’s looking for the greatest possible value in shipping and trucking rates to help offset the impact of moving goods out the door.

Also in Houston, Gallery Furniture has made changes over the several last years for increased efficiency in its logistics approach that are paying off now, Operations Manager Jeremy Hunt said.

“Now that the logistic world has turned to chaos, we have continued to improve on a system that has done well for us,” he said. “We use our own fleet for a majority of our inbound logistics. We send out several teams weekly from coast to coast. All our teams are true teams (driving in turns), and this allows the truck to spend more time moving then sitting still.”

Quality mattresses in the trucks provide better sleep quality for the off-duty driver.

“We don’t back haul; we head straight to our supplier, get loaded faster and return with the merchandise faster to our warehouse,” Hunt continued. “This gives us a two-day head start. These trucks don’t make money sitting in a rest area or parking lot with merchandise in the back of them, they make money by getting to a warehouse and then into customer homes.”

Hunt said Gallery watches inventory “to the minute.”

“When we see items’ inventory raising, we are quick to hit that stop button, and again it all goes back to having a relationship with your vendor,” he noted. “You order weekly; you manage how it comes into the facility. And when there is a rush of containers drop, we use the offsite facility to manage the overflow. Then you double-display the items, accessorize them differently to give the customer more looks. Don’t heavy discount, but make it irresistible not to buy.”

That said, maintaining a healthy inventory level these days makes some discounting unavoidable.

“Brutal reality is sometimes you have to take deep discounts to keep cash flow and keep the customers buying,” Hunt said.

By necessity, Custom Home has been spending more to staff its back office at levels adequate to support its custom-oriented main showroom and the outlet center it opened in January.

“Our front-of-house staff is set in place and solid, but there’s always turnover in the warehouse,” said co-owner John Gray. “We’ve had to raise starting rates there and still not always getting what we’re looking for.”

The retailer’s revised approach to delivery scheduling this year has helped save dollars and time to help offset such costs.

“We try to look further down the calendar to alert customers when their products are coming in and when we can get it to them; we not just reactive anymore,” Gray said. “We’ve been able to build fuller loads by filling them in with orders that might come in between the scheduling of the truck and when it goes out — people who might buy something out of inventory and want it right away.”

Gray said Custom Home is constantly analyzing what’s on order and cherry picking what’s coming in: “We’re only buying what we have to have and canceling things we can cancel.”

“As a special-order store, we traditionally didn’t carry a lot of inventory, but we had nine to 10 months’ worth arrive at once for the outlet center,” Gray said. “We’re trying to get back to our old stock levels, but I haven’t had to discount beyond normal parameters. I feel like I’ll be over the inventory bubble in the outlet center in the next 30 days. On the custom side, orders from six to nine months ago are rolling in. We should be back to normal (for C.O.) in two or three months.”

Belleville, Ill.-based Mueller Furniture is on the verge of closing a deal on an 85,000 to 88,000-square-foot existing facility for a headquarters and distribution center that will include 60,000 to 65,000 square feet of warehouse space.

The three-store St. Louis area retailer currently uses three smaller warehouses totaling around 50,000 square feet. The existing warehouses are only partially racked, but the new warehouse will be fully racked.

“We have the ability to put in three times as many racks as we have now,” said co-owner and General Manager Mark Mueller. “In 2021 any inventory was good inventory, but our focus since early January has been right-sizing inventory, and we’ve done a pretty good job picking winners and avoiding a lot of heavy discounting.”

Mueller added that a big discount sometimes is the right move.

“If it’s a SKU you’ll never re-order, you can afford to sell it at your buying cost vs. your re-order cost,” he said. “There are SKUs you can afford to discount a little deeper. If it’s a SKU you have the intention of buying again at a higher cost, you don’t want to discount it yet just to move it.”

Furniture Today also asked retailers about how well their vendor partners are cooperating to stabilize order flow for accommodating anticipated business conditions.

Like other stores contacted, Gallery Furniture is in constant contact with vendors to make sure that orders are placed and produced without causing what Hunt called “constipation for both of us.”

“When you have 80% or more of your product being made in the U.S., then you can control and stabilize the flow of inbound merchandise,” Hunt said. That approach helped offset what he called the “madness” of container pricing and scheduling.

“Unfortunately you can’t stabilize what (ocean carriers) don’t want stabilized. Items that we have had to import just show up, for that we have utilized outside warehousing to accommodate that overflow. Then we use advertising to sell over stock quickly.”

Mueller Furniture has delayed some incoming shipments, but the store tries to avoid that.

“I feel bad when that happens because that messes up our partners’ logistics,” Mueller said. “In the overwhelming majority of cases, our vendors have been very cooperative, and we’ve made it work with our key suppliers.”

Order flow was a particular problem at Custom Home’s outlet center. The retailer began ordering containers for that operation last year.

“Especially with new-vendor orders, we were receiving the first and second orders on the same ship,” Gray said. “For the most part, (our vendors) have given us some breathing room between initial orders and back orders.”

On the domestic incoming transportation side, Gray credited specialized carrier Murrow’s for working with Custom Home’s schedule in staging deliveries to make sure there’s room for receiving incoming goods. That’s been critical, Gray noted.

“This is a huge growth region,” he said. “We’re sitting on a lot of sold merchandise for new housing, and we’re at the mercy of the contractors getting the house done.”

Exclusive’s Zavary noted that a lot of its manufacturers have worked hard to re-sell or hold on to canceled or delayed orders: “We aren’t getting a lot of pushback from most vendors.”

Efficiency in final-mile operations and higher delivery fees were points of emphasis at retailers contacted for this article.

“We have raised our delivery fees,” said Zavary at Exclusive Furniture. “We did that eight or nine months ago, and we’re sticking with it.”

Custom Home also raised delivery fees to help offset increased personnel and fuel costs.

“We’d raised it in January, but that was because it was years old,” Gray said. “We upped it again in March because of gas prices.”

Custom Home also upped its freight percentage to the landed cost of goods when figuring pricing to counter increased expenses for gas, freight and keeping quality people.

“You try to eke a margin point out here and there,” Gray said.

Mueller Furniture outsourced some home delivery to ease its own over-burdened final-mile efforts.

“We’ve added a third-party delivery service in addition to our own team,” Mueller said. Customer orders are shipping quicker now,” adding difficulty in keeping up with deliveries was a big reason inventories got so high.

“You sometimes hear horror stories about working with third parties, but we’ve had a great experience with Rapid Response out of Wentzville, Mo.,” he said.

For its part, Gallery Furniture isn’t going to skimp on final mile service, so Hunt said it’s a question of time management.

“We do what it takes to get the job done,” he said. “You can cut cost, but at what expense? We believe in customer service, getting them that furniture today. While most operations are telling the customer when they can have it, we let the customers tell us when they want it. We reduced the time frame of deliveries from six hours to four hours. But such changes mean having the staff on hand to do it. You don’t cut cost at customer expense.”

Furniture Today covers all the news concerning manufacturers, retailers and suppliers in the home furnishings sector.

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