Lending Samples

The ever so perplexing dilemma of lending samples in the flooring industry.  To do or not to do is such a debate that many owners are willing to argue the merits to either side of the coin until they are blue in the face.  Some will say that lending samples is an open invitation for customers to shop the competition to get a lower price and others will say that if they were to not lend samples, customers would get upset and choose to buy elsewhere. 

Some flooring companies have taken the validity of both arguments and reached a compromise.  Samples are handled in the following way:  They are brought to the home, by the sales/measuring associate, shown in the true environment and brought back to the store at the completion of the measure.  If the customer needs samples for matching paint or fabric colors up to three samples are ordered and given to the customer at no cost; many manufactures will ship samples to the customer at no additional cost to the store.  This process will eliminate the issue of samples being checked out only to never return or the need to buy more samples to have backups of the “more popular” items.   This process, although a bit restrictive, is still customer centric while protecting margins and keeping your products out of the hands of the competition, who in most instances are willing to take the order off the street at any cost.

As with many business arguments, this topic is based mostly on opinion and we all know what they say about opinions and people’s backsides.  Fortunately, data gathered from a substantiated survey conducted by Benchmarkinc, in which several hundred flooring owners participated over a three year period ending in 2013, yielded some valuable insights:

  • Total volume – total net sales
    • Nearly $1 million greater than the average for owners who did not lend samples
    • Nearly $1.1 million greater than those who do lend samples
  • Gross profit - $’s generated after direct expenses
    • 4% for those who do not lend samples
    • 4% for those who do lend samples
  • Sales productivity – the $’s generated by each full time equivalent that sells
    • About $16,000 less for those who do not lend sample versus those who do lend samples
    • About $15,000 less than the average for those who do not lend samples
  • Close rates – the percentage of total opportunities that turn into a transaction
    • For those who did not lend samples their overall close rates were 3.9 points less than those who do lend samples
    • For those who close in the home, the close rates for those who do or do not lend samples was nearly identical; off by two hundredths of a point
  • Owners salaries
    • Owners that did not allow lending of samples earned nearly $32,000 more than those owners that do lend samples and a about $30,000 more than the average
  • Cost of samples – total cost of samples and displays
    • Stores that do not lend samples spent on average $11,334 on samples and displays
      • Representing .26% of net sales
    • Stores that do lend samples spent on average of $12,858 on samples and displays
      • Representing .39% of net sales

Now you can see why this is so hotly debated.  On the pro side of lending samples, one could argue that not lending samples has a negative effect on close rates and sales productivity.  Now the side against lending samples would argue that they have a higher gross profit, lower cost of samples, higher sales volume, and they make more money.  One great benefit related to this data is that we can take it one step further and finally put the debate to rest with some quantifiable evidence. 

Let’s run some numbers and see, based on financial performance and not opinion, what is the best strategy for your business.  If by not lending samples an owner generates an additional $1.1 million in volume at a 38.4% gross profit she/he would experience a gain in gross profit dollars of $422,400.  Now after taking into account the lower close rate, decrease in sales productivity, and effect on traffic, the practice of not lending samples is still the clear winner in this battle. 

For those of you that are going to change your policy and NOT lend samples just making a hasty switch to a new policy could have a negative effect on sales and customer service.  Before making this change, it is highly recommended that the sales associates are thoroughly trained on the new policy and a lot of role play training is conducted to teach them how to handle objections or challenges faced when dealing with customers.  As Vince Lombardi one said, “Practice does not make perfect, only perfect practice makes perfect”, so make sure you have a good game plan with your sales staff and practice perfectly until they get it.