Increase Gross Margin - Four easy ways to maximise your store's profits

Freelance retail consultant and social media advisor Richard Huxley explains how some small changes can make a big difference to your profit margins

We all love working in our stores (we do, right?), and we love interacting with our customers on a daily basis but more importantly, we love – and need – profitability in our business in order to be able to continue what we do. Here are just a few ideas about improving profitability in your store.

Look after the pennies

As the old phrase goes, ‘see a penny, pick it up’, but could you be picking up more pennies across your store? And as another popular phrase goes, pennies make pounds. Whilst it may seem unusual to adopt a strategic decision to increase prices, especially in the current climate, if you do it the correct way, it can be hugely beneficial to the profitability of your business. Retailers do it frequently, both with variations in regional pricing as well as differences in format pricing. For example, Tesco Express often have slightly higher prices than their Supermarket estate, sometimes these are subtle, sometimes not. A product that has a price of £1.99, will, in their Express format have seen a slight price increase, for (as they say) the convenience. So expect to see products at £2.01 or £2.02. These increases are glaringly obvious. What you do doesn't have to stand out quite so much to the consumer, but can still add extra revenue across your store.

It’s important to not abuse customers trust with any price increases, customers want a fair product for a fair price, so, pricing reviews and adjustments should not be an ongoing exercise, but rather a very infrequent look at the products you sell and how you can maximise the revenue on those products for the short/long term. I have spoken to several retailers about their pricing strategy and most, have, at some point or another, embraced price increases as a way to improve their profitability. These have ranged from subtle increases on lower value products with higher turnover, right up to larger increases on products that have a lower volume turnover.

These increases have been either store wide, category specific or product specific, and the most successful of them all has added around £2k to his store’s profitability over the past two years. All of them have seen an improvement on their gross profit.

How to do it

The best way to approach this seems to be category specific. Use both your knowledge as well as EPoS to analyse sales data for a specific category and highlight where you can make subtle changes. EPoS will not only allow you to initially identify where to begin, but also to see any sales patterns emerging, if it’s working, and if sales go backwards. For retailers who have EPoS it can be a really beneficial tool for giving accurate information and to measure performance.

It’s important with pricing products to take a 'less is more' approach. While some retailers opt for adding 5p or 10p to the cost of their goods, it will stand out to customers. You may wonder if it’s worth adding just 1p - but if you saw a penny in the street, the majority of us would pick it up, right? So pick up those pennies wherever possible.

Look at what you stock

The range we stock can also be critical to our sales and profitability for a number of reasons. Are you stocking the right products, does every product fight for its place on your shelf? It’s a really important part of retailing, monitoring your product range and adjusting as necessary based on both product sales and changing consumer trends.

Range reviews are commonplace across larger retailers but seem to be underutilised by smaller retailers. Reviewing your range allows you to both identify poor selling products, both product specific and brand specific as well as highlighting your best products.

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