Profit margin is always an essential factor in every business and retail sector is not excluded from this phenomenon. If you have been in business for years, irrespective of whether it is retail or any other, you are vigilant about profits. But how specifically retailers can increase their profits?
First, let’s talk about the average profit earned by retailers. After surveying more than 13,000 retailers, researchers came out with a report that maximum retail businesses across the globe have the gross profit margin 50.96%, though the UK has little high-profit margin, i.e., 53.12%.
However, key industries like the jewelry store, beverage manufacturers, and cosmetics have the highest profit margins with 56.80%, 60.68%, and 57.54%. On the other hand, electronics, alcoholic beverages, and sporting have the lowest profit margins, which is 39.31%, 38.91%, and 42.09%.
Now let’s start with the strategies that retailers can embrace to stay ahead in the competitive market with better profit margins:
- Get better inventory visibility-
32% of retailers fail to manage their inventory efficiently that eventually hamper their sales. Retailers are usually engaged with so many tasks, in such a mess, keeping track of inventory is difficult, or mistakes in inventory management is very common. Many times, retailers add in-stock of few products even when it is out of stock. These typical mistakes lead to reduced visibility of inventory.
That’s the reason, today; many retailers are embracing inventory management software to keep an accurate track of their inventories, so they didn’t miss out anything and make fake promises with their customers.
- Take your brick and motor store online-
Let your store go with the technology flow. Retailers have to serve customers better to keep them consistent with their store. So why not try online option- stay ready to help your customer wherever they are! However, not every retail store is companionable with an e-commerce store, but if your customers find you online, your profits are going to be high. Even if you plan to make a non-shoppable website, at least display your products or services online.
Always remember, your website grows as you do so make sure you add the storefront image along with inventory displayed will be a game changer. Highlight your contact details, and location on your website.
- Increase the perceived value of your merchandise-
It is incredible to know that cosmetic retailer has high profits margins and you know the fact behind this- building a personal and emotional connection with customers. That’s the reason why most of the cosmetic brands excel in the market smoothly.
However, beauty products always allow customers to think positive about them and enhance self-confidence. More so, the price also never bothers people much. You might have seen advertisements of beauty products how touchy they are! So try to boost your creativity level, right from the packaging of goods to branding and marketing efforts.
- Choose an alternative way to reduce expenses-
Operating expenses are the primary reason for the business’s poor profit margins. Always look out for an alternative to reduce operating expenses as much as possible. Try to outsource your non-core tasks as it is one of the best ways to cut the costs and stay focused on core business aspects.
Below mentioned tasks can easily be outsourced for your retail store:
- Retail accounting
- Data management
- Web development
- Inventory management
- Order processing and fulfillment
- Implement savvier purchasing practices-
Whether you are at a trade show or at the negotiating table with your suppliers, always try to lower your costs. Before, negotiating or purchasing, sit and think! Calculate the final value of the product including wholesale price, taxes, shipping, etc., and then analyze being a customer, if you will pay this amount for this particular product.
This practice can help you price your products and give you the ability to bargain with your customers or suppliers logically. Always ask your vendor suppliers to offer you better discounts on bulk purchasing of goods.
- Increase your average order value-
Once the customer visits your store, try to maximize their spending. This is one of the great ways to increase your profits. Start with up-selling and cross-selling methods. See, as the customer purchases your product, he/she has shown his/her trust towards your brand and will always look for better products and offers.
So it makes sense if you encourage them more to buy products from your store. More so, if you display the product strategically, it also plays a very crucial role. One more approach is, put your best sellers and upsells near the counter for desire buys to increase order value.
- Optimize vendor relationships-
Above, we’ve already talked about; better negotiation with your suppliers will help you to improve your profit margins. However, building better relationships with vendors by working them closely also have a significant impact on your profits.
According to researchers, retailers should engage in Joint Business Planning with their vendors. This tool is very collaborative wherein benefits and goals are agreed to, and initiatives are developed to help reach those goals. In short, both the team supports each other to improve their profits.
- Put discounts on products smartly-
Everyone loves discounts. Even retailers love discounts from their suppliers. In the same way, your customers also love discounts. This technique can help you gain more profits if you are smart enough.
What you need to do is analyze the average percentages that can help convert customers instantly. See, some customers will not turn at 20% offer, and some don’t even require much convincing. So decide a common denominator and set the percentage on all the products.
- Perk up customer access to products –
60% of retailers, find click and collect method very costly as serving the customer at their exact location is tough. Though, it is an excellent way to connect your online and physical store location.
Why this a challenge for retailers? Well, diving inventory of your brick and mortar store and your online store everything seems a mess.
Thus, if your product is at the physical location, allocate them to click and collect consumers instead of always shipping new products and unnecessary shipping charges.
- Plan and strategize seasonally-
Retailers can earn the most during their peak season. You should plan strategically for your peak season to increase your sales. Typically, peak season varies from different countries and month-to-month. Retailers who have been in the business for years are very well-versed with these fluctuations. It is essential that you make wise purchases of stock to fulfill your customers demand seasonally.
You don’t always have to do massive changes in your business to improve your bottom line. Take action now and grow later!