Strategies to improve Profitability

Boosting your operational revenue is great, but you should never lose sight of your profits. We will look at how to Increase Your Profit Margins with Strategies to improve your profitability.

A healthy profit margin is key to your success. Your profit margin is an indicator on how healthy your revenue stream is, also showing you where you can make improvements and where to cut costs.

Avoid Product Markdowns By Improving Your Stock Visibility

Markdowns are one of the biggest profit killers in your retail operation. So the best way to avoid markdowns is to try and not have slow moving stock. Maintain good purchasing habits by monitoring your stock levels and keeping close eye on stock that is not moving quickly, view your stock holdings daily and avoid purchasing stock that is not moving quickly.

Use those inventory insights to make decisions around purchasing and sales. A great tool like Retail Analytics make great use of an overview of your sales and purchases with key stock items been highlighted on your main dashboard.

Reduce Operating Expenses by Streamlining Your Operations

Many retail operators have asked the question how do I do this? With a great Retail Solution you can automate your processes, reduce time spent on tasks, Manage your team better with an integrated Retail Solution, use your accounting systems reporting tools to get insights into your expenses and see where you can reduce costs.

Lower your overheads by reducing wasteful spending and by using less expensive supplies (as long as you don’t compromise quality). Automate repetitive tasks to save time and further reduce your expenses.

Increase Your Average Value

Increasing the basket size or average order value (AOV) from shoppers already in your store is a great way to improve your profits. You’ve already invested in getting them to your location; now go and find ways to maximize their spend. Encourage increased spending by recommending relevant items, create bundle deals.

Many retailers know that strategic product placement can also increase AOV. Getting your most profitable products in direct view of your customers increases the chance they will add those items to their shopping basket.

Increase basket size through suggestive selling. Promote impulse buys at the checkout counter.

Get Into Better Habits With Savvier Purchasing Practices

When purchasing items always make sure you have invested time on looking at multiple suppliers and once you have found a good supplier, make sure to negotiate better pricing on large orders, ask for discounts and offers. Negotiate great payment terms and setup correct procurement methods within your business to avoid any unauthorized expenditure.

Don’t be afraid to ask your supplier to give you a discount or throw in a few extra units.

Increase Your Prices

Raising your prices will enable you to make more money on each sale, thus widening your margins and improving your bottom line. Be careful not to overprice yourself or you could ultimately lose customers using this strategy.

On top of considering basic pricing components like your costs and margins, look at external factors such as competitor pricing, the state of the economy, and the price sensitivity of your customers. Increase the cost of your luxurious items whilst your low cost high volume items may need small tweaking to the price, to ensure not over pricing yourself out the market.

Be creative with your price increases

You may also want to consider implementing creative or psychological tactics when coming up with your prices, to make them more appealing. You can, for instance, incorporate tiered pricing into your strategy.

Get A Great Relationship With Your Suppliers

Get a working partnership with your suppliers and build on a good relationship. This creates an environment of understanding. This greatly helps your business in the long run. With a great partnership you can negotiate better prices and terms, allowing you to get better margins on your items whilst keeping your cash-flow healthy.

Reduce supply chain costs and inefficiencies and have proper procurement processes in place. Use well positioned logistics, reduce delivery costs and improve delivery times. Have a collaborative relationship with your direct suppliers and reap the rewards of a good relationship.

If you ‘MUST’ Discount Your Items

When applying discounts be smart about it, use your historical data and plan your discounts correctly, getting a good discount planning regime can work to your advantage if done right.

The time must be right. Timing is also critical. There is a fine line between too soon and too late. If you hold on to items too long, you will eventually have to sell them at a much deeper discount.

Good historical information and experience are crucial. Being overstocked on old, undesirable inventory will tie up your money and prevent you from buying new products. Eventually, your volume will decline, rendering you with fewer margin.

Personalize offers so you’re not giving away too big of a discount to people who would convert at a lower threshold

Test different types of promotions to see which ones are really making you money

Increase Staff Productivity

A great way of boosting profits is to increase your staff productivity. There is a good chance your employees are not been utilized to the best, at no fault of their own.

According to Harvard Business Review, businesses lose over 20% of their productive capacity to organizational drag. ‘the structure and process that consume valuable time and prevent staff from getting things done.

As such, it’s important that you evaluate your store processes to ensure that they’re not slowing people down. The key is to come up with procedures that can easily be replicated and implemented by your staff even when you’re not around. Boosting performance and moral.

Other was of boosting performance

• Set the right sales targets and motivate your team to meet (and beat) those goals.

• Identify the key traits of successful retail associates and develop those characteristics in your staff.

• Implement retail hiring and training best practices to boost performance, sales, and customer service.

• Help your team overcome their fear of selling.

• Educate your staff on suggestive selling.

• Train your staff to upsell and cross-sell.

• Train your staff to make a better first impression with customers.

Eliminate Wasteful Expenditure

Interrogate and Eliminate areas of waste in your business and save money, increase your cash-flow.

The make to order manufacturing industry recognizes 8 types of wastes that are costing businesses money. Many Manufacturing use these strategies to improve profitability.

The eight areas of waste can be defined into the acronym DOWNTIME.

• D – Defects (defective products due to issues like quality control, poor handling, etc.)
• O – Overproduction (ordering or making more merchandise than necessary)
• W – Waiting (unplanned downtime, absences, unbalanced workloads, etc.)
• N – Not utilizing talent (not fully leveraging the skills or potential of your team, having employees do the wrong tasks, etc.)
• T – Transportation (unnecessary movements of products — e.g., unnecessary expenses, inefficient movement from one store to the next)
• I – Inventory excess (surplus or dead stock sitting in your backroom)
• M – Motion waste (unnecessary movements of people — e.g., inefficient store layout)
• E – Excess processing (having to process, return, or repair products that don’t meet the customer’s needs)

If you want InstantRetail which is powered by Sage 200 Evolution & Sage Business Cloud and used by prestigious retailers and wholesalers such as the SPAR Group contact: sales@instantretail.co.za.