Finance a home appliance store: find a pro credit

After several years of exceptional performance, the appliance market is experiencing a more measured evolution. The environment is indeed less favorable for several reasons, in particular some product lines have reached a saturation stage in households, and the economic context is generally more tense. In addition, because of competitive pressures, prices are falling steadily. This overall analysis needs to be nuanced according to market segments. It is for the major appliance market that the situation is the most contrasted due to the slowdown in transactions in real estate. Professionals try to fight against the saturation of the market, in particular by encouraging purchase by heart or by improving the environmental performance of the products.

The segment of small household appliances remains dynamic with sales growing steadily. Discounted prices are not, indeed, an impediment to impulse purchases. In addition, the very frequent technical innovations and fashion effects, accelerate renewals, or gift purchases. The market for brown products, camcorders, mp3 players, cameras for example, is nearing records. Boosted by the enthusiasm for new technologies, it benefits from all the technological innovations, and from the increase in the rate of equipment in household computers. Specialty supermarkets and convenience stores provide the largest share of the market. The self-employed must join groups in order to remain competitive.

The decomposition of the appliance sales market in France

The decomposition of the appliance sales market in France

The sector is organized in 4 areas:

  • Multi-specialists offer a varied range. It can be furniture and appliances as for Conforama. Others offer audio-visual and cultural products; this is the case.
  • Specialty appliance stores limit their offering to brown or white products. Their after-sales service is very developed.
  • Department stores and mass merchandisers sell home appliances. They offer more and more offers in audio-visual.
  • As for e-commerce, it is growing steadily.

The constraints of opening a home appliance business

The constraints of opening a home appliance business

No training is required to practice in this sector. Similarly, no specific rule concerns the opening of an electrical appliance and electronics retail business. It is subject to the common law of the retail trade as well as to that relating to the safety of the places receiving from the public.

In addition to these general rules, special regulations apply for the sale of certain materials. Thus, the labeling of appliances is governed by a European directive.

Similarly, another directive specifies the rules on waste electronic and electrical products and the establishment of the eco-contribution.

Trader status

Trader status

The professional has the status of merchant and is registered with the register of companies of the Chamber of Commerce and Industry. As with most activities, it will be possible to practice as an individual entrepreneur or by creating a corporation. The taxation of the individual entrepreneur follows the regime of industrial and commercial profits. The professional is subject to corporate income tax if he has created a company, or includes the income from his business in his income tax return if he has opted for the business. In this sector, most professionals work in the form of companies.

In this market, only the VAT rate is 19.60%.

The characteristics of the profession

The characteristics of the profession

The isolated independent professional must join a group to obtain satisfactory purchasing conditions. He realizes himself the facilities and the small maintenance. If he does not himself provide the after-sales service, he must subcontract it. The layout of the premises is the most important investment and must be renewed or renovated frequently. Professionals who provide after-sales service must also have equipment and a vehicle.

Managing the management of an appliance sales point

Managing the management of an appliance sales point

The success of certain ranges allows for very good sales. We should take advantage of the enthusiasm for these products with an energetic commercial policy: advertising, promotions, discount, etc. The sector is subject to a continual decline in prices, which makes it necessary to constantly benefit from the best conditions on the part of central purchasing bodies.

Inventory management must be optimal. In particular the effects of fashion force to avoid the storage of outdated and unsaleable products. From this point of view the out of stock is preferable because much less risky.

If he provides the after-sales service, the professional analyzes his results to balance the charges and revenues. Heavy repairs are often carried out by external service providers. The internal after-sales service is a small contribution in terms of turnover.

The market is very cyclical. The most dynamic period is that of the last quarter due in particular to the end of year celebrations and university re-entries. The summer period is gloomy.

Household appliances provide better margins.

Purchases are the highest expense item. They reach on average more than 60% of turnover. Then come staff costs and advertising communication costs which can represent 4% of turnover.

To succeed, it is imperative to maintain revenue and gross margin. We must therefore ensure the rapid turnover of stocks so as not to risk having unsold products due to fashion effects, or technological innovations.

Service charges must be strictly controlled. In case of slippage it is better to outsource these benefits.

Prices are falling steadily, so the market rate of return is quite low. Due to the heavy inventory and investments, the professional must have very important own funds. These must reach at least 50% of stable funds to avoid dangerous indebtedness.