The Ultimate Goal of Every Retailer

Once upon a time retail was simple. A retailer could open a shop, stock it with products and watch customers walk in and buy.

Today retail is a completely different story.  To be successful, a retailer needs to be capable in a plethora of skills including people management, sales, marketing, finances, leadership, coaching, buying, competitor analysis and more. 

What determines whether a retailer survives boils down to the most important retail business concept… making a net profit.  If you haven’t got a financial background (which majority of retailers don’t) this article is going to cover the 3 measures that impact on net profit, and strategies to increase it.

Net profit is impacted by 3 key areas:

1.     Sales

2.     Margin (gross margin)

3.     Costs

Let me break each of these down further and help you consider strategies for each.

Sales. This is otherwise known as revenue and is the amount of money you make from selling products or services. Strategies to increase sales are often focused on increasing customer traffic into your store, increase average value of each sale, or converting a higher amount of browsing customers to purchasing customers. In order to achieve these increases in sales you need to measure the performance of your store and sales people to track improvements and determine areas for improvement.

Margin. Margin is the difference between your selling price and how much it costs to acquire the product.  The higher the gross margin, the more the business retains of each dollar of sales. Strategies to improve your margin include managing markdowns and sales, resisting discounting in selling, managing shrinkage, improving relationship with suppliers, improving product mix and visual merchandising.

Costs. These are expenses that a business incurs through its operations. This could include rent, wages, advertising, insurance and other costs.Wages are the largest controllable expense in a retail business and should be one of the key areas of focus to reduce costs.

The first step in increasing your net profit is to understand where improvements can be made. The next step is setting financial goals and outlining strategies to achieve this.

To find out more about how to increase your net profit, call 6one5 Retail and speak to a consultant 02 94610478.