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Saturday, July 9, 2011

How to Increase Retail Store Profits Without Increasing new Customers

Other than increasing retail store sales  by increasing customer flow there are things a good business person can do to increase profits.
Every little bit added together can make a dramatic increase to store profits when sales are not increasing.

  1. Increase the gross margin of each sale. That means buying items at a better price and selling them for a higher retail profits. Shop around and get the best deals possible. Look at the bottom line price that includes discounts for cash payments, and shipping costs. These costs adding in can bring margins up or down.
  2. Control Shrink. Shrink can bring a store to its knees and force it to close. Control Shrink and watch you store's profits climb.
  3. Payroll expenses. Don't tell your employees but payroll is one of the largest expenses any business will have. You must have the right balance in man hours to run a store correctly. Too few and there is no to do the work. Too many and your just wasting money. Salaries need to stay competitive. You get what you pay for. Finding the right people you pay less and train can save much on payroll.
  4. Getting the right location is very important. You want the lowest possible rent with the highest possible customer flow. With a unique retail store people may travel anywhere to get to you. If you have an average store you need street traffic to pull people in the door.
  5. Other expenses. Keep good records. If you don't know what your spending on things you cant control them. Keep spread sheets with all your expenses. You should have a column for current expense, last years expense and plan budget. Break it down month and year. Constantly review them to see where improvements need to be made. These expenses include everything you spend money on broken down by category. Some expenses include: Travel, insurance, office supplies, cleaning supplies, services, phone, electric, repairs and maintenance, banking, garbage, etc.
  6. Good Customer Service. Keeping your current customers spending the same amount is as important as increasing your sales. The last thing any retail store wants is for sales to decrease. Keep your current customers happy and your customer base will increase by word of mouth. Bad Customer Service and watch your sales drop.
You would think at looking at all these things that increasing profits would be hard to do.  But just a little change in each area will increase your profits.

 Every little bit adds up to a sizable increase.  
Here's an example.

Today: Sales $250,000
cost of goods $145,000 = 42% gross margin
Payroll 40,000
Rent 30,000 = 12 months @ $2500
Shrink 5,000 = 2% of sales
Utilities 7,200
Supplies 1,500
maint. 1,500
other 1,000
Profits $18,800


Get better pricing on goods, sell more items per customer, better customer service, cut back on man hours, control shrink, recycle, cut back on off hour lighting, add power saving light bulbs, change to an online phone provider, save on bank fees and supplies, Negotiate lower rent, fix things yourself etc..


Plan : Sales $250,000  ( no increase in sales)
Cost of Goods 137,500 = 45% gross margin
Payroll 39,000
Rent 28,800 = 12 months @ $2400
Shrink 4,500 = 1.8% of sales
Utilities 6,000
Supplies 1,200
Maintenance 1,200
other 1,500
Profits $30,300 = 61% increase

Increase Sales by 4% or $10,000 and Profits go up to $34,800. Its important to note that these numbers aren't real and yours will be different. But it shows how with a little effect in all areas of business you can make a big difference to the bottom line.



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