Retailers weigh in on the profit dollars vs. gross margin percentage debate

In the world of retail, especially in the competitive mattress industry, businesses often find themselves at a crossroads when it comes to prioritizing financial metrics.

One of the most heated debates in the Facebook Mattress Industry Network Group, has revolved around the question: What holds more significance for your mattress store — profit dollars or gross margin percentage?

This contentious topic has sparked differing opinions and passionate discussions among industry professionals, each with their unique perspectives on the matter.

To dive into this debate, let’s consider a scenario: Imagine your mattress store currently operates with a solid 52% gross margin on an average ticket of $588 for a queen-size mattress.

Now, here’s the twist: What if you could offer a discount on a superior model that results in a lower margin of, say, 48%, but the average ticket price jumps to $688? The question that arises is whether the higher profit you’d make from the increased average ticket offsets the slightly decreased gross margin percentage.

Some experts argue that focusing on maximizing profit dollars is the ultimate goal for a mattress store. After all, profit dollars are the lifeblood of any business.

Daniel Hearndon, owner of Express Mattress in Crossville, Tennessee and a top contributor to the network, succinctly sums it up: “Can’t put margins in the bank.” In his view, profit dollars are what pay the bills and keep the business running smoothly.

Matt Hudnall at Good Mattress Plano echoes this sentiment, emphasizing the importance of cash flow. He recognizes the allure of premium high-margin sales but doesn’t underestimate the significance of cash sales. In the end, it’s all about keeping the business financially viable in the short term.

On the flip side of the debate are those who argue that maintaining a healthy gross margin percentage is vital for the long-term sustainability of a mattress store. Joshua Rigsby, co-owner at ESC Mattress in Seattle and another top contributor, raises a valid point: “Doesn’t margin grow profit dollars? I don’t think there is a black-and-white answer to this question.”

Rigsby emphasizes the symbiotic relationship between margin and profit, highlighting that a healthy margin percentage can contribute to sustainable profit growth.

Fawad Zavary from Exclusive Furniture adds depth to the discussion by emphasizing the importance of offering a range of products with varying margin percentages. He notes that while it’s acceptable to make a lower margin on some items, the goal is to balance it out with higher-margin items. This approach allows for flexibility while maintaining overall profitability.

Ultimately, the debate underscores the complexity of running a mattress store. There is no one-size-fits-all answer. Every business strategy has its unique strengths and challenges, and the key lies in finding the right balance that works best for YOUR mattress store.

In the Mattress Industry Network, the debate continues to rage on. It’s one that encapsulates the essence of retail business — balancing immediate financial gains with long-term sustainability. As the experts have shown, both perspectives have their merits, and the ideal strategy may lie somewhere in between.

In the end, it’s all about maximizing profitability while ensuring the longevity of your mattress store.

Lawrence Heilers

Lawrence Heilers is the owner of Texan Mattress, a fast-growing franchise group of specialty retail mattress stores in Texas with eight franchise locations.

View all posts by Lawrence Heilers →

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