Selling Furniture Through A Retail Store

      Woodworkers discuss reasonable terms of the deal when showing furniture at a retailer's showroom. Markups on already made pieces, prices for custom orders, and simple referrals each involve their own reasonable market value. June 23, 2006

Question
There is a small new retail store that recently in town that wants to display a few pieces of my furniture for sale. I have only done custom up to this point. One of the big reasons she wants to show my stuff is because she frequently gets requests for custom furniture and she wants to both have stuff to sell, as well as point to my work and send business my way. She wants a percentage, which is fair enough, but how much should she get? She wouldn't be designing it, just passing along my information. This is in San Francisco.

Forum Responses
(Business and Management Forum)
From contributor G:
It hurts, but my guess is 50%. Ask her what she needs to make it work for her, maybe she will surprise you.



From contributor D:
Two problems:
When does it stop? Ten years from now? It should be up for periodic review. What constitutes a referral? Jotting your name on a piece of paper and handing to a friend? This needs to be rigidly defined so that you both know what to expect, and when. Don't forget to include how changes will be handled, and that she'll be paid only after you are paid 100%.

A better scenario is where you sell your work to the shopkeeper, and she sells it for whatever she wants to. If she sends people to you for custom work, then a 5% referral is common. Or you can sell it to the shopkeeper, and she sells the custom work to the buyer.



From contributor T:
I would suggest a discounted price on the sample furniture to get started, with the understanding that it can also be sold. Other than that, the suggestion of asking her what she wants seems the best approach. Anything up to 50% is what the market will bear.


From contributor E:
When I worked "to the trade only" designers would bring their clients to the showroom where our price book reflected retail prices with a 30% mark-up that would be mailed directly to the designer. We had designer's waiting at the door with checks in hand before we opened in the morning and we were invoicing $300K per month out of a 4000 square foot showroom. Unfortunately, this is not the case anymore but we certainly were a happy group and we were rocking and rolling.


From contributor R:
You have 2 different things going on here. If you put a piece in someone else's store on a "consignment" it is usually a 60/40 split; 60 to you and 40 to the store. Referrals only with no design input will get a commission of 5-10%. If she is designing the piece and really working with the customer, you will pay upwards of 30%. These numbers are very subjective of course, but what you see here is pretty typical in most markets. The prices should be "value added"; meaning you should add their fee on top of your price.


From the original questioner:
I think Contributor R has the right idea for me. The items that are there are likely going to be a 40% markup. It's the referrals that are in question. I was imagining 5% to pass along a card, 10% if I she's really involved, and 15% if I never have to talk with the client and she handles everything, including general design. Is this typical? It's a retail store, so it is not exclusive to the trade.


From contributor G:
I would expect a store in San Francisco would have to turn a lot of product or a high mark up to make a profit to offset the rent.


From contributor E:
A 60/40 split is standard for a dealer but they are usually required to purchase a minimum (say $25K). There are risks when selling to a dealer in your local area. Mostly, being that you will not be able to sell at retail again when you have a local dealer charging less. Customers can and will search this out to your detriment.

Even if you sell at a discount it works the other way and the dealer will complain. You can't win because you are stacking the odds against yourself. I don't know of any designer that would not be offended by a referral fee of 5-15%. I believe in their mind they believe that they are entitled to at least 30%.

Architects, engineers and builders believe that they should get more (and they do). This is how we get bedroom sets that cost the customer $28K and when the customer finds out that the manufacturing cost was $10K they go out of their minds. I'm not trying to put ice on anything, just trying to give real life numbers.



From the original questioner:
Contributor G - the rent is high in SF for retail, often somewhere between $1-$5 and up per square foot, depending of location, but the residents are crazy rich.

Contributor E - I can understand 30% and up, if that is common and only if they do all of the customer service. But is 10% really offensive for handing out a card if they aren't a designer, just a retailer? I do want to add incentive to pass along my card, but not if it makes my work too expensive and I end up wasting too much time making d.o.a. bids. I appreciate the honest advice, since that's what really helps! I usually work directly with clients, hence my ignorance on the subject, but I'd much prefer to move into dealing with designers and architects who may charge a lot, but also understand I need a lot too.

Also, what about consignment? What if I offered to put my work in a store at no cost to the owner? What would the typical split be there? I would really like to sell more retail, if possible, but all the woodworkers I know do custom only, so they have no advice for me. I hate sales, and anyone else willing to do it for me deserves some cash.



From contributor E:
You paint a good picture and I really wish it were that easy but experience keeps telling me different. You can always sit down with your contact and talk plain turkey and maybe they are out of the ordinary. I really hope that is the case.

You could always produce "exclusive" items for this client that would protect you from any conflict but you have to keep in mind that your dealer is out to make money (and rightfully so) and just as if you hired a salesman they are not going to field clients for a few percent. My dealers always knew that I would quote my customers at retail and what really hurt was that my dealers knew what my discount or (net) price was and they would (always) use this as a wedge.

I had quite a few dealers around the eastern U.S. and while they were considered our bread and butter the profit margin was not that high but the referred customers were considered "found money" because they were almost always "pre-sold" and your dealer is going to feel this way too. I certainly wish you luck and by all means, give it a trial. It can’t hurt that bad to get your feet wet and see how it goes. It's just that every local dealer I ever had put me under the bus.



From contributor J:
The thing to bear in mind about any retail premises is that only a certain amount of money is going to walk through the door. The retailer knows this. If they get a customer then they can quite often choose what they are going to sell to the customer. They are not going to sell one of your pieces if they are going to make more money selling something they have sourced through a normal wholesale supplier.

Naturally they would like to have lots of nice things on display, and if you're prepared to supply them at no cost then they will be happy to find you some space. You won't be getting any sales, though, unless they are getting a nice slice of the profit, and 5% isn't going to do it



From contributor R:
I think you missed what he described in the original post, John. The referral fee is just that. Hand someone a card for 5-10%. A consignment is when you place your furniture in their store for free for a certain length of time, usually 90 days. If it sells then the store gets 40% and you get 60. If it does not sell, you get your stuff back. If the store is making active sales, with design, for custom pieces, the rate would likely be 20-30%. When doing deals like this, as Tele said, these people will try to throw you under the bus. You must be polite but firm when dealing with these people. You have to have all of these important details written out before hand. If not, here comes the bus!



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