24 April 2024, 14:16
By Gordon Hecht Jun 24, 2021

Price-rise payday?

Prices are rising across the board, and will ultimately hit the consumer’s wallet. As they creep upwards in-store, reconciling value and cost can be increasingly problematic – so salespeople might want to maintain some perspective, writes US bedding retail expert, Gordon Hecht … 

Whether your economic theory preference leans toward Keynesian policies or Dickensian policies, you can’t help noticing that prices have been going up for the last 8-12 months. 

Over the last decade or so, prices have remained stable – and even decreased for technology and energy. 

My training in economics at my alma mater Sagebrush State University consisted of discussing the pros and cons of splitting eights at the blackjack table, and I don’t pretend to be an expert, but I can give some perspective on the value of rising prices (aka inflation). 

My home furnishing career started in 1973 as a delivery helper at Jay’s Furniture, Carpet, and Appliances. On a clear day, you can see the (former) location from the 16th floor of Las Vegas Market (Building B). 

The owner promoted a $99 kingsize mattress almost every week. He could do that because gas was under 40 cents a gallon, and I was earning $2 an hour. The salespeople who sold the king mattress doubled my earnings, earning $4 commission every time they sold one.

It was an ideal situation for the time.  I could eat lunch at McDonald’s and get change back from my dollar. Entertainment was priced at 89 cents for a sixpack of Schlitz, and $2200 bought you a decent brand-new car. 

Then things changed. Gas doubled in price, a Big Mac shot up to $1.19, and it took about three grand to buy some wheels. That $99 mattress became the $159 special – but the boss could be generous, and boosted starting pay to $2.50 an hour. 

Flip forward to 1980. I’d had my diploma for a couple of years, and scored a job making about $15,000. My new sports car set me back $8100, and my brand-new three-bedroom home (two years in the future) required a 30-year note to pay off $65,900. 

I could afford all of that because the $99 king mattresses I was selling were $499 now. The invisible hand of Adam Smith (see, I did learn a little about economics!) guided wages and profits higher, trailing every price increase. 

Those of us who worked in the very late 1970s and early 1980s should remember the very large increases in prices – often 10% every 4-6 months. As a salesperson, it became harder to justify value-to-cost to myself. Luckily, my very sage store manager, Louis Landro, explained it all to me in one sentence: “Every price increase is a pay increase for the salespeople.” 

It was true then, and it’s true now. Price increases are not limited to the products in your store. Costs are increasing for every manufacturer – so the guys and gals in the store down the street (or next city, state, or across the planet) are experiencing the same jolt as you are. 

And it’s not just our industry. Food, fuel, technology, housing (big time), building materials and more are increasing in cost. You know it, and your shopper knows it too. 

Price increases are a hassle and a disruption in your day. You have to re-tag your store and reprice your website. So does everyone else. But that change in tag means another $25-100 in the register with every sale. You can’t even argue that price increases mean less sales. Increasing that $99 king mattress to $159, then to $499, and now $1599, didn’t cause less units to be sold, because the products were still good value in the marketplace as it stood in the moment. 

Price increases mean that your sales team can sell the same number of units and get paid more money. Price increases also mean that the percent of sales dollars devoted to covering occupancy costs (stable) and operational costs (if fuel prices remain steady) decrease – generating a great net profit for you. 

Nobody likes to pay more for the same thing. It’s one of those things that are in our sphere of concern and outside our sphere of control. It’s up to you to look on the dark side (the world is crumbling!) or the lighter side (the situation is not limited to my four walls – I’m still on an equal standing). 

Costs and prices will stabilise. They always do. We, who used to curse at $1/gallon gas now cheer when it’s $1.99. 

Ride out the adjustments, change your tags … and remember to review compensation for your hourly and salaried employees, to keep them level too. 

Gordon Hecht is senior manager, strategic retail for US-based Serta Simmons Bedding Company. He started his 30+ years in the home furnishings industry as a delivery helper and driver in Las Vegas, and later served in sales, retail management and consulting roles.

© 2013 - 2024 Gearing Media Group Ltd. All Rights Reserved.