The furniture industry is one of the largest growing industries in the USA. This is the type of industry that is evergreen and will continue to thrive even in the coming years.
Just like fashion trends keep changing, furniture trends also change after every few years. What makes the furniture industry grow at a rapid pace are not these changing trends but the growth of the real estate and hotel industry.
If you are considering stepping into the furniture business and want to know how much profit you should be expecting, don’t worry. Here, we will guide you through everything you need to know before starting a furniture business and how to maximize sales.
Understanding the Furniture Industry Trends and Market
First, you must understand the market and what is trending to step into the furniture industry. This is a very cluttered market, so you can’t step into it and start offering all types of furniture.
Picking Up a Niche
If you wish to stand out from other furniture stores in USA, you need to find a niche that inspires you. It could be living room furniture, bedroom furniture, kitchen, lawn furniture, and much more.
When you sell only specific furniture, it’s easier to establish a strong market presence. For instance, if you only sell living room furniture, people are more likely to buy furniture from you when renovating their living room.
Picking up a niche is not only limited to the functionality of furniture; it also depends on what types of products you are bringing into the market.
There are different types of furniture, for example, contemporary, modern, traditional, royal, and much more. You must understand your target audience and make furniture according to their needs.
Do a Market Analysis
Once you have understood your niche and decided what inspires you, you need to do a market analysis to understand what other brands in your niche are offering.
Doing a market analysis allows you to consider what distinctive elements you can introduce in the market to fill the gap. It can also help you find some potential opportunities to incorporate in your business.
Full-Fledge Business Plan
As discussed, the furniture industry is very big, and you need a lot of investment to grow in it. To step into the furniture industry, you need to build a full-fledged business plan and follow it.
The business plan should comprise of the following sections:
- Where will you source the products
- What is your target audience
- How can you make yourself different from competitors
- What are potential gaps in the market
- How to manage finances
- How to market your products
- How to manage logistics
Role of Digital Marketing
If you wish to grow your business instantly and have an advantage over the competitors, then you should focus on building a strong online presence. You should connect with influencers in the home and furniture niche and collaborate on content that can promote your products on their social media channels.
Influencers have a strong following, and they can have a great influence on the general public.
You need to have an interactive website and social media channels where you can post informative content related to home decor and how people can use your products to create a lively space.
With the recent development of AI, furniture stores have started to offer augmented reality experiences that allow people to see how their living space will look when they place their newly bought furniture there.
What are Furniture Profit Margins?
The furniture profit margins are the net gains made from furniture sales after deducting total expenses. The profits are calculated in two ways; the gross profit margin and net profit margin.
Gross Profit Margin
The gross profit margin is the company’s ability to generate profit from its operations. It’s easier to calculate; you just need to divide the gross profit by total revenue and multiply by 100.
The gross profit is the revenue you have made, subtracting the cost of furniture production.
Net Profit Margin
The net profit margin is calculated to determine the financial viability of a business. The net profit margin is calculated by dividing net profit by total revenue and multiplying it by 100.
Here, net profit is the revenue earned, subtracting the furniture cost, operating expenses, interest, and taxes.
Net profit gives a good insight into the stability of a furniture business.
The net profit margin depends on a variety of factors, such as overhead costs, which are the costs that businesses pay in terms of display, advertising, decor, customer support, and more.
Next, it depends on the labor costs. If the labor costs are high, the net profit margin will be much lower. Similarly, shipping costs also play a key role in determining the net profit margin.
According to stats, the average gross profit margin for retail furniture business is well above 40%. The average net profit margin varies for every business.
