EZ Process Pro
When Should a Furniture Store Order Merchandise for a Special Order Customer?
Don't order or reserve special order merchandise until the customer's deposit covers your cost. Your cost is what you paid for the piece plus freight. For most furniture and mattress stores, that means collecting 50 to 60% down before the order goes to the vendor.
Retailers who order before their cost is covered tie up cash in inventory and lose money fast. Picture a $1,000 sofa. You paid $400 for it and $100 in freight, so your cost is $500. The customer puts $100 down, you place the order, and they never come back. You're out $400, and that sofa is sitting in your warehouse aging and getting dinged.
In my 25 years working with furniture retailers, I've seen this gamble fail more times than I've seen it work. Here's how to set the rule, enforce it, and handle the exceptions.
What Counts as Your Cost?
Your cost is what you paid for the piece plus the freight to get it to your warehouse. That's your landed cost, and it's the only number that matters when you figure a deposit.
If a sofa costs $400 from the vendor and $100 in freight, your cost is $500. Collect $400 down and you think you're covered. You're not. You're still $100 exposed on a piece the customer can walk away from.
You must include freight in every deposit calculation. On heavy pieces and long hauls, freight is a big part of the bill, and leaving it out is how a safe special order turns into a loss.
Why 50 to 60% Down Works on Special Orders
The rule is simple: the deposit has to cover your cost. 50 to 60% is the rule of thumb because most retailers aim to at least double their cost, which is a 50% gross margin.
Special orders hold that margin better than almost anything else in your store. The piece isn't sitting on your floor, so there's no reason to discount it. When you sell at full margin, 50% down covers your cost. Going to 60% gives you a cushion when the margin on a piece runs a little thinner.
What Happens When the Customer Goes Quiet
This is the scenario every retailer has to plan for. The sofa arrives, or you pull one from stock and reserve it for the customer. Now you need them to pick it up, schedule delivery, or come in and make a payment. They don't.
Your team calls, texts, and leaves messages. Meanwhile the sofa sits in your warehouse. Every week it sits, it ages, and the chance it gets damaged goes up. If you reserved it from stock, you can't sell it to the next customer who walks in wanting it. Your cash is locked in a piece you can't move.
If the deposit covered your cost, this is a headache. If it didn't, you just lost money.
When 50% Down Isn't Enough
The 50 to 60% rule of thumb works when you sell at full margin. Not every sale does.
A high end gallery might run its cost at 40% of the selling price, so it's covered with less down. A discount mattress or living room store might run its cost at 50 to 65%. At 65%, a 50% deposit leaves that store exposed.
Clearance, aged floor stock, and damaged pieces run thinner margins too, sometimes as low as a 35 to 40% gross margin. If you're reserving one of those for a customer, 50% down won't cover your cost.
Know your number. Check the landed cost on the piece in front of you, not your store average, and make sure the deposit covers it.
When the Customer Can't Cover Your Cost
This is where retailers get in trouble. You're writing up a $1,000 sofa, your cost is $500, and the customer can't put $500 down. Before you take the sale, ask yourself one question: do you want this customer, and do you want this risk?
The answer starts with a policy. "This is how we do business. We require 50% down, 100% of the time." Say it the same way to every customer. No case by case calls on the floor.
If you're going to make the sale work, get your cost covered today. Combine cash, credit card, and financing to get there. A customer who puts $300 down and finances the other $700 through a lender like Synchrony or Wells Fargo is covered. You don't have that money yet, but you know exactly where it's coming from.
What you never do is order on layaway: $300 down, $700 balance, and you place the order hoping the customer comes back with the rest. That's not a sale. It's a gamble with your cash.
Let Your System Enforce the Rule
The best way to enforce the rule is to take the decision out of your salesperson's hands. Set the rule in your software so a special order can't be ordered or reserved until the deposit requirement is met.
That does two things. It keeps the store out of trouble, because nobody can bend the rule to save a sale. And it takes the pressure off your salespeople. They're not telling the customer no. The policy is. "Our system won't let me order this until we have 50% down" is an easy sentence to say across the desk.
The rule to set: order or reserve only when the deposit covers your cost, or when all funds are accounted for. All funds accounted for means the balance will be paid through either in house or external financing like Wells Fargo or Synchrony. A balance with no committed source should never trigger an order.
Some retailers also treat a COD balance as accounted for when they know the customer is good for it. Use that sparingly. A COD balance is still the customer's promise, and if they disappear, you're left holding the bag.
What to Do When a Special Order Doesn't Meet the Vendor's Minimum
Many vendors require a minimum order, either a dollar amount or a set quantity. A single special order often won't clear it on its own.
Take a design center in Durango, Colorado. A customer buys a sofa that costs $2,000. That particular manufacturer has a minimum order dollar amount of $2,500. The store has two choices.
Wait and combine. Keep the purchase order open and unsent until another customer buys from the same vendor. Two $2,000 sofas make a $4,000 order, and both ship.
Order now and fill the gap. If the lead time is four months and the first customer can't wait, place the order now and add other special order pieces, like a side table, nightstand, or rug, to clear the minimum.
Neither choice is right every time. It depends on the vendor, the lead time, and the customer. What makes either one safe is the deposit. When the customer's deposit already covers your cost, holding an open PO means you're waiting on the vendor, not gambling on the customer.
Put Your Special Order Policy in Writing
Stay in integrity. That's the most important part of any special order policy. Whatever your rules are, the customer hears them before they pay, and they're printed in the fine print on the sales order.
The more common problem isn't the customer who disappears. It's the wait. A custom piece is built by the manufacturer after you place the order, and that timeline is out of your hands. It can take 4 to 6 months. If the customer doesn't hear that up front, they'll blame you when month three comes and the sofa still isn't there.
Here's an example of what your fine print should cover:
Your custom piece is built by the manufacturer after we place your order. Lead times are set by the manufacturer and can run 4 to 6 months. Once your merchandise arrives, we'll hold it for 90 days. After 90 days, we'll release it to another customer. If you still want it, you may need to reorder, and if the piece is discontinued, you'll need to reselect.
Your policy will look different. There are a thousand variables, and every store has to build a policy that fits how it runs. What matters is that you can stand behind it 100% of the time, explain it plainly to every customer, and never change it on the fly.
Be thorough, because a vague policy costs you. If a customer finds a loophole, the right move is to refund the money, not argue. Now picture that customer put $5,000 down on a $7,000 sofa. One gap in your policy and the whole $5,000 goes back. Clear expectations at the start keep you out of trouble and keep the customer happy.
Deposit and refund rules vary by state, so run your policy past your attorney before it goes on a sales order.
How EZ Process Pro Handles Special Order Deposits
Jill and I built EZ Process Pro to run our own furniture store, so this rule is built into it.
In EZ Process Pro, the owner decides when special order merchandise gets ordered or reserved. You can set it to happen:
- At point of sale, no matter how much is paid in
- When a set percentage is paid in
- When the sale is paid in full
- When all funds are accounted for
When a balance goes to external financing, the system tracks it, recognizes that all funds are accounted for, and tells your team to order the merchandise, or reserve it if it's in stock. With the rule set to all funds accounted for, a layaway balance won't trigger an order until it is either paid off, or you tell the system that the balance will come from financing.
For vendor minimums, EZ Process Pro keeps purchase orders open and ungenerated. You can hold a special order on an ungenerated purchase order until another sale from the same vendor joins it, or add other pieces to clear the minimum, and then generate the purchase order.
You set the rule once. The system holds it on every sale, and your salespeople never have to make the call on the floor.
Frequently Asked Questions
What percentage deposit should a furniture store require on a special order?
Enough to cover your landed cost, which is the merchandise plus freight. For most furniture and mattress stores, that's 50 to 60% down. If your cost on a piece runs higher than usual, require more.
Should a furniture store wait until a special order is paid in full before ordering it?
No. Once the deposit covers your cost, you're protected, and you can place the order. You can also order when all funds are accounted for, meaning the balance will be paid through in house or external financing. What you shouldn't do is order on a small deposit and hope the customer pays the rest.
What should a furniture store do when a customer never picks up a special order?
Follow your written policy, and make sure the customer heard it before they paid. A common approach is to hold the merchandise for a set period, like 90 days, and then release it to another customer. If the deposit covered your cost, you're stuck with a headache instead of a loss.