Almost everyone I've ever met thinks interior designers get deep discounts on all interior furnishings. There is this notion that we're all getting everything really cheap and just reselling things at high prices to gouge our clients.
I am being totally honest and upfront with you by saying:
That's just not true.
This is the world of retail, folks; and the retail business isn't that much of a mystery.It all involves the basic principles of supply and demand. I mean, just think about it...
Walmart vs. Mom & Pop
Who do you think gets the best discounts on products?
As much as I wish the tables were turned, the simple truth is that the discounts designers get are less significant than the discounts retailers are privileged to have.
You see, residential designers rely on a vast array of sources for products; they typically don’t duplicate their design over and over; and they'll use a number of different suppliers or vendors because each project has their own unique style.
In the eyes of those vendors or manufacturers, residential designers are actually small-time buyers. Because, over the course of a year, there might only be a few instances when their product makes sense for a client's unique design plan.
However, there are situations when exceptions are made. Designers who make regular purchases or frequently work deals with a few vendors can get better discounts. This is called getting "dealer" pricing. Typically, designers who make frequent purchases with a particular brand over the course of a year can maintain the relationship that's needed to retain this type of pricing.
Then there's the Internet, the online under-cutter that makes price competition even stiffer.
If a product needed for a project is available online, anyone can easily do a few Google searches to find out who has the best price.
So to stay competitive, designers who sell product that can also be had online -- and let’s face it, anything that’s not custom can be found online -- must price their items within the range of what online retailers are charging. This means they'll probably be making less than the retailer they're competing with, because they get special quantity pricing - and, really, that's only fair.
So if a designer has to sell products at price points that are competitive with those of retail sources, how much money does a designer actually make?
When manufacturers sell direct to us (designers), the discounts generally range from around 40-50% off the MSRP (MSRP is much higher than the price that retailers are offering as their retail price). So because all retailers -- both online and brick and mortar operations -- know they have savvy shoppers on their hands these days, they do the best they can to be as competitive as can they can be with each other. Ultimately, this means retailers will go as low as they can off the MSRP to win the sale, while at the same time making sure they earn enough profit to stay in business.
So unless someone is making an impulse buy, or price isn't a factor to them, the lowest price will win every time.
In the traditional world of online furniture shopping, it seems to me that the retail prices that are widely available on home furnishings items are roughly equivalent to a designer discount plus 20-25%, which is less than the MSRP.
Keep in mind: I've done a lot of comparison pricing. I've tested things out to see how my pricing stacks up and what I just mentioned is generally about how it works out. I’d like to hear from other designers if they have found this to be about right.
So if designers are pricing themselves competitively with online sources on product that they might purchase direct from a manufacturer or designer showroom, that leaves designers making about 20-25% on an item.
That 20-25% "profit" actually covers a lot of the time spent tracking and following up with orders, as well as doing the accounting required for purchasing product. It also covers the time spent creating the vendor relationship and researching the product to become knowledgeable about it, which is really the pre-project work.
So once all that is taken into consideration, the actual profit margin shrinks considerably. As a matter of fact, a 20% "profit" will merely cause you to break even. I have heard that, statistically on average, a designer's break-even point is somewhere around 16-18% (that’s about where it is for my business). This leaves a designer making somewhere around 5-10% after everything that goes into selling a product has been factored in, if they are selling at a competitive price.
Oh, and I almost forgot! There's also the risk of someone being unhappy with the product when it arrives, or there's a problem with it, or it arrives damaged. Time spent on those problems can eat away at your profit in a heartbeat, potentially leaving you in the red.
The perception of the "big designer discount" is really just a myth.
By the time a sale is all said and done, a 5-10% profit is just not much to make up for all the effort that goes into making it happen.
But don't get me wrong! Of course, we want your business! We do want you to buy from us! We do need that money to be able to keep afloat!
And yes, we certainly understand that you want the best price you can get! And as long as we aren't going to lose money for having given it to you, we'll do our darndest to make sure you save as much money as possible.
Ultimately, we all want a win-win, which will always be the fairest deal there is ;-)