Some retail operations face an uphill battle to generate sales this holiday season. Yet, there may be better options than taking drastic measures to increase profit margins. When confronted with spiraling costs due to high inflation, retailers may opt to lay off loyal employees or give the store away by offering shoppers exorbitant discounts. There are ways to deal with rising costs and declining sales that can improve operations and provide long-term benefits.
Increase Prices of Select Products
Selling products at competitive prices is top of mind for store owners. However, independently operated home improvement stores win against the big boxes on service and convenience, not pricing. It may be time to consider slightly raising prices. Increasing the cost of top-popular products, “blind” items, and exclusive merchandise by a dollar or two can significantly impact margins. Remember to include store-branded merchandise consumers believe is a better value than national brands. Private-label products typically cost less and can absorb price increases with less notice.
Identify Slow-Moving Inventory
Stores that fail to check inventory usually have products on the shelves collecting dust. By reviewing sales data and inventory levels, owners must know what products customers are buying. Before placing orders with vendors, be sure the merchandise is in demand by customers, or there is a limited supply on hand. Regularly checking sales data and inventory is a good habit that prepares operations for unexpected economic downturns. Consistency and focus on “right-sizing” inventory are critical to improving profit margins for home improvement retailers.
Manage Time Wisely
Paying for little things like window cleaning and setting up window displays can increase business costs. Consider if these tasks can be handled by staff during slow periods. It can be difficult for some owners to delegate duties to other people. However, more time spent on tasks unrelated to growing the business means less money coming into the business. Increasing Profit margins should be a priority that outweighs responsibilities that another member of the team can handle.
Avoid “Panic” Discounts
While it makes sense to offer planned discounts and special savings for the holidays, retailers should refrain from steep deals that cause the business to lose money. Shoppers may also perceive the merchandise was initially overpriced, or that the company is desperate to get sales. There is a happy medium where retailers do not solely concentrate on price. People who shop at the local hardware store know they may pay less at a big box store—they come for the service and benefits of interacting with knowledgeable and committed staff.
Bundle Products to Add Value
Shoppers like getting a deal! Bundling products and selling them at a discount motivates customers to buy. Since retailers can select specific products or services offered in the bundle, it gives their business a competitive advantage. Shoppers are looking for holiday gifts and purchasing unique product assortments may be their best choice. Upselling existing customers is an ideal way to increase profit margins and provide good service.
Retailers who have been in business for a time, understand combating rising prices, inflation, and inventory issues can be an ongoing challenge. Being pro-active and managing issues before they become bigger problems is the best approach for companies to pursue.
