Shining Light on the Industry
Oates: Bedding, far and away. That business just lends itself to a higher margin. You’re looking at margins in the high 40s to low 50s. I don’t know anybody making that kind of money on electronics, which in many cases are in single digits. And in many cases, depending on the product and what the promotional schedule is around holidays, it’s sometimes negative margin on the front side, anyway.
What’s happened is the entry-level product is so good today that consumers don’t see a real value in stepping up to a better product, because ultimately, all they’re looking for is a good picture on their TV to watch the ballgame. You have to stand and deliver the message to them. But if there’s no profit in standing and delivering the message, you take the order and get on down the road.
In many cases, that’s what’s going on, particularly on salesfloors that are not incentivized. Even on incentivized floors: If there isn’t enough profit in it to afford that, then you have a problem, when they can walk across the aisle, in many cases, and sell a mattress and they’re going to make three times the money they’d make in selling a TV that costs twice as much.
The consumer doesn’t understand, nor should they be expected to. All they know is, hey, I want a new TV. And they make an automatic assumption that if we’re buying something and selling it for $1,000 that we’re making $500. They have no concept. So it’s incumbent upon us to try and find a way to deliver a value and say, All right, there is a difference between this entry-level product and this better product, and here’s why it’s going to enhance your experience.
The long and the short of it is, they’re strapped for money, so people are making decisions, saying, This is good enough, which doesn’t allow profit opportunity, or allow the vendor community to build better product to make more money.