Retail

40 Ways To Improve
Retail Profit Margins

by

Bob Nelson
President
POWER Retailing, Inc.

All stores need to manage inventory, costs and expenses. This means knowing how to run your business from the top to the bottom. To help you compete in today's competitive business environment, here are some tips, tactics, and ideas to use to become a more profitable retailer.

1 — Implement a computerized system to manage, control, and balance your inventory.

2 — Make your business distinctive and carry merchandise your competitors don't have

3 — Price merchandise at what the customer is willing to spend, not on what it costs.

4 — Focus on buying more named brand promotional and off-price merchandise.

5 — Make a budget and follow a detailed open-to-buy plan to eliminate overbuying.

6 — Seek out manufacturers to purchase merchandise at below wholesale prices.

7 — Test different aspects to promote business: -- new offers -- new items -- new prices.

8 — Identify vendor performance regarding sales, mark-up, turnover, and profits.

9 — Don't accept deliveries you can't use, or arrive after the specified completion dates.

10 — Use sales forecasts, expense sheets, and financial statements on regular basis.

11 — Computerize your business to streamline everyday tasks and business procedures.

12 — Develop a tracking system for those products that are your best-sellers.

13 — Buy closer to the selling season to minimize the risk of making a bad buy.

14 — Attend trade shows and join buying groups to find better values.

15 — Seek suggestions from vendors on ways you can boost business.

16 — Use a store questionnaire to aid you in determining customers' wants and needs.

17 — Negotiate with your vendors to obtain better prices and faster deliveries.

18 — Ask your main vendors to share in paying freight costs.

19 — Inquire if your suppliers will help with co-op advertising.

20 — Consider adding private label merchandise to establish better margins.

21 — Create an initial pricing strategy for special value and off-price products.

22 — Evaluate your open-to-buy and expenses on a regular basis.

23 — Establish a flexible buying plan that allows for special in-season purchases.

24 — Replace fringe, non-compelling, and borderline inventory classifications.

25 — Use toll-free telephone numbers for reorders and communication with venders.

26 — Develop a timely markdown strategy to dispose of out-of-season inventory.

27 — Avoid shortages of your most popular and profitable classifications.

28 — Implement a reorder strategy for your best-selling items.

29 — Promptly return substandard and problem merchandise.

30 — Ask for invoice extensions and take trade discounts allowed for timely payments.

31 — Offer customers better prices, more values, wider selections, and add-ons.

32 — Specify delivery and completion deadlines for all initial orders and future reorders.

33 — Display merchandise to make it easier for customers to see, feel, touch, and buy.

34 — Look for new opportunities to increase prices on items your competitors don't carry.

35 — Insist on credits or adjustments for late deliveries and substituted orders.

36 — Bargain for exclusive rights and products that will not be sold to the competition.

37 — Ask for markdown money for excessive or unreasonable in-season selling losses.

38 — Eliminate excessive stock in slow-moving and unprofitable categories.

39 — Adjust your stock on hand with estimated sales projections and customers needs.

40 — Pay attention to your monthly overhead and business expenses ratios.

By managing your business more effectively, you'll be able to provide better values, attract more customers, improve your average sales transaction, and offer customers new opportunities to visit your store.

Bob Nelson is President of POWER Retailing. The company works with retailers to create strategic marketing and promotional plans to quickly strengthen your cash flow and financial position. Powerful solutions to improve cash flow, profit margins and the net worth of your business.

Retailing

STEP-BY-STEP PROGRAM FOR SUCCESS

In Retailing, the Trick is

TO KNOW

the Competition & Your Customers Do

You have the right to promote your business in a way that distinguishes it ahead of every store that you compete against. If you make it a more inviting place to be, people will prefer to buy from you instead of the competitors.It is not the customers' concern why you are in business. People don't care if you need to make payroll, even if you have a hundred different diplomas or the most popular person in town. They only buy because of a benefit that your business provides. It is called -- WIIFM (What's in it for me?)

A. What benefits do you offer?

B. What are you doing better than your competition?

C. What are they doing better than you?

Eliminate Your StressDo you know the best ways to reach your customers? Today, there is a new tough consumer... they demand value - they love choices - they love new products - they want convenience - they want to save time - they don't want hassle - and they enjoy fun-filled experiences. Here's a list of how clever retailers are changing their procedures and focusing on connecting with today's shrewd buyers.

CUSTOMER ANALYSIS:

1. Find out who your customers are and what they are seeking.
2. Profile your customers by age, income, occupation, etc.
3. Know the reasons why customers shop at your store? (service, convenience, dependability, quality, promptness, or competence).
4. Understand the market forces affecting the consumer's attitude when it comes to price and what they expect to pay.
5. Emphasize areas of appeal such as: special sizes, lower prices, better service, wider selection, good location, or convenient hours.
6. Offer unique products at prices your customers can well afford.
7. Have a tracking system for how many customers shop your store every day.
8. Seek suggestions from your best customers on ways you can boost business.
9. Try to re-establish lost or inactive customers.
10. Use a store questionnaire to aid you in determining customers' needs.
11. Plan on making any changes to satisfy the new value-conscious consumer.
    

CUSTOMER RELATIONS:

1. Improve your return policies.
2. Make it a policy to give cash refunds when requested by the customer.
3. Offer customers a "no hassle" satisfaction guarantee.
4. Use a suggestion box and customer want slips.
5. Extend your store hours.
6. Accept Visa, Mastercard, Discover, and American Express.
7. Analyze complaints and take action to prevent recurrence.
8. Train employees to service and work with customers in a professional manner.
9. Call customers to let them know when new items have arrived.
10. Have lots of convenient parking for customers to use.
11. Have a clean bathroom available for customers to use.
12. Grade your store's location every year in regards to and accessibility.
13. Create a system to let customers know how much you appreciate their business.

MANAGEMENT SKILLS:

1. Use advertising techniques to create urgency and motivate customers to buy now.
2. Test different aspects for promoting business: -- new offers -- new items -- new prices -- special announcements -- stronger ads -- and better headlines.
3. Know what type of advertising methods work the best to attract customers (direct mail, newspaper, television, radio).
4. Use memorable advertising that sets your business apart from the competition.
5. Create new opportunities for customers to purchase more frequently from your store.
6. Implement proven business formulas of other successful retail firms.
7. Replace outdated methods with new techniques and better resources for retailing in today's high-tech, fast-moving, and competitive marketplace.
8. Set up an inventory control system in regards to shrinkage, performance, amount of merchandise, mark-up, profit, and turnover.
9. Determine whether to price certain items below, at, or above the market.
10. Utilize a system for tracking slow-moving merchandise and those products that are your best-sellers.
11. Use different ways to arrange and display merchandise that will make it easier for customers to buy.
12. Know your average sales transaction and what you can do to increase it.
13. Increase your sales transactions by offering better prices, more value, sales incentives, or add-ons.
14. Know which products are price-sensitive to your customers, that is, when a slight increase in price will lead to a drop-off in demand.
15. Know the maximum price customers are willing to pay for certain items.
16. Computerize your business to help streamline everyday tasks such as inventory control, point of sale, and overall business analysis.
17. Evaluate the amount of inventory you carry, and fine tune your operating expense ratios on a regular basis.
18. Buy distinctive merchandise that fits into a niche your competitors don't have.

INSIGHTS FOR A SKILLED MARKETER:

1. Attend trade shows that provide the latest technology, inventory systems, educational seminars, and other industry related resources.

2. Use newsletters as a "marketing tool" to remind customers of the products or services you provide. Create a budget for both regular and off-price merchandise, and do you know what role they should play in your buying strategy.

3. Establish dependable resources where you can buy current, name brand and designer merchandise below wholesale prices.

4. Make it an effort to buy promotional and off-price merchandise to improve your profit margin.
5. Buy private-label merchandise to avoid the same line prices of your direct competition.
6. Join other stores like yours in area-wide buying programs to receive better prices or trade discounts.

7. Do cross-marketing by joining forces with restaurants, clubs, or whatever to jointly develop special promotions.
8. Belong to trade associations and subscribe to newsletters and trade publications to keep you informed.
9. Involve employees in making suggestions for improving business and cutting costs.

10. Implement a program to reward employees for their extra efforts and innovative ideas.
11. Empower employees to make important decisions, even if it means losing a small amount of money to make your customers happy.
12. Don’t let emotions get in the way of making sound business decisions.

SUMMARY: Your Business Can't Survive Without Customers!

To succeed and prosper, you must learn effective procedures and become an expert in your area. The key is to control your expenses, refrain from overbuying, re direct your open-to-buy only to profitable resources, and develop a better strategy.
The success of your business will be in direct proportion to your insights and management skills. The bottom line is this: If you don't do an exceptional job of training employees... motivate customers to take action... or don’t do the strongest job to sell them once you have their attention... you are cheating your company of profits it could potentially be earning.

Power Retailing