By Doug Smith, director, product marketing, retail and distribution, Epicor Software
There is a common misconception higher margins are one of the easiest ways to improve business performance. This is not necessarily always the case. You can also boost margins by cutting the expense side.
It’s a fact — when your average margins increase by any amount, that amount goes straight to the top line and the bottom line. By boosting the margins, you achieve multiple goals: faster (and very real) growth, greater profits, and a greater return on your inventory investment.
The right technology is required to hit this goal. Along with a few proven business practices, your point of sale (POS) system can help move margins up — if the system has the right tools built in. Here are five strategies you can put to work right now to help grow your margins and your business.
1. Stay Alert With Margin Alerts
Packed with powerful features, an inventory management tool is one of the most commonly used technology features for retailers — it’s viewed many times per day by a number of people in a typical retail environment.
Highly visible alerts can typically be setup and notifications delivered when an inventory item or category is being sold at margins outside the limits you set. For example, if you’re expecting a 35 percent margin on a certain category or item, you’re going to know quickly if margins dip to 34.9 percent or lower, and you can take steps right away to correct the problem.
2. Monitor Competitive Price
With all of today’s pricing pressure from big box stores and online retailers, spur-of-the moment pricing strategies aren’t just obsolete, they’re margin killers. Because gathering competitive prices can be time-consuming, intuitive tools are essential.
Pricing technology provides a powerful toolset that streamlines the process of gathering competitive prices. It usually features a mobile app that enables you or your team to use smartphones or tablets to capture pricing in competitor stores. You can simply scan items right in the aisles of your competitors. You can store competing prices for later analysis.
3. Pinpoint High-Margin Opportunities
Retailers can use powerful technology tools to analyze where their prices are lower, higher, or on par with competitor pricing. This can lead to a number of opportunities:
4. Check The Basket
Powerful basket analysis tools give visibility into item affinity — which items customers tend to buy at the same time. With this information, you can develop more relevant promotions and improve merchandising and add-on sales.
5. Identify And Eliminate Inventory “Black Holes”
A nice, high margin on an item is no good if you virtually never sell that item. You may be better off using the space — and the inventory investment — to offer lower-margin items that sell regularly. You’ll boost revenue, profit, and GMROI. Business performance management tools help easily identify items that simply don’t sell, and take the guesswork out of deciding which ones to drop from your inventory.
Doug Smith is a director of product marketing for Epicor Software Corporation. He joined Epicor in 1999 and is currently responsible for product marketing, managing the retail and distribution solutions product lines.