Increase Retail Profitability Through Margin Management

The ultimate goal of a retail manager is to make a net profit for your store. While you might be a manager or store owner because you love your job or you love what you sell, the only way your store and business can survive is through making money.

Management and leadership capabilities are key to this, however understanding the finances of your retail business is crucial to success.

Many retail managers we work with find the finance side of the business to be a challenge and they sometimes ignore the financial aspects of their business. However, our philosophy is, if you can’t measure it, you can’t manage it.

Margins are an indicator of your stores financial health.Managers need to understand their approximate margins and manage them to optimise profit. This can be a challenge given that our Australian consumers constantly look for the discount. Consumers have grown used to expecting a discount which is putting pressure on retailer’s margins.

As a retail manager you have the ability to manage margins more effectively to maximise profit. Let’s look at 6 strategies for margin management:

  1. If stock is not selling at the expected rate, it is better to discount it progressively at higher margins rather than wait until the end of season when you may have to sell below cost price
  2. Merchandise stock in a hot spot to sell it faster and avoid heavy discounting
  3. Transfer the stock to another store where the sell through is better for that product or category
  4. Offer sales people a SPIF (Special Promotion Incentive Fund) or incentive to recommend and sell the product
  5. Conduct a product training session with staff focused on slower moving products
  6. Run a local promotion using slow moving stock at a discount to attract new customers

If you find retail finance to be challenging, we offer an interactive and practical retail finance online training program designed to support you improving the performance of your store.