Every retailer quickly learns there's a lot more to the business than selling something for more than you paid for it. Or, maybe we should say every successful retailer.
A quick look at a retail income statement tells us there's a big difference between top line sales and bottom line profit, but the question is: how can an independent retailer exert control over the gap between the two?
When we look at the future of retailing we don't see the ability to increase gross profit as something that's bound to get easier.
In a day & age when any shopper can quickly and easily compare your offer to dozens of other offers, and when shoppers have been conditioned by big box chains to ask "When will this be on sale?", profitable retailers will have to look to something besides simple markup to increase profitability.
The next place every retailer would like to look is to the cost of goods. Reducing that cost might very well increase the profit margin. And retailers who find themselves lucky enough to be in a position to make private label programs work, may actually be able to improve their results.
But for many independents, especially those in categories where larger chain stores dominate, buying in larger quantities or somehow negotiating better terms is going to prove to be tricky.
When you can't just raise your prices, and suppliers seem less than enthusiastic about reducing your costs, how are you going to improve your results? By reducing your expenses of course.
Successful independent retailers put special emphasis on reducing real expenses by:
In retail, as in any business, reducing expenses is not as simple as just deciding to spend less money. In business, reducing expenses depends on becoming more efficient.
You could try to reduce your expenses by cutting your labor cost, but realistically how much do you think customer service would suffer if you did? (Not to mention that little thing called sales.)
If you could increase your sales per square foot by making your store smaller that would be pretty slick, but realistically how much less shoppable would your store be for every 500 square feet you gave up?
One growing retailer put it this way: "To keep thriving, we have to be careful not to fall into the trap of pretending we can do more with less. We tried that and we just ended up doing less with less. What we really needed was to do more with more.
I've learned how to have both a short-term and a long-term focus. Now the business is growing again, and our margin is not shrinking."