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Learn the ways to Increase the retail profit margin In the Next 5 minutes

“Profitability is the sovereign criterion of the enterprise”-Peter .F. Drucker

So from where this profitability will come? When it comes to the retail sector, how do you calculate the profit margin? In the next few seconds, we will check the incredible ideas to increase the profit margin of your retail business store.

The pandemic time changed the customer buying behavior. Brick and mortar stores were in a struggle to survive that time. Curbside pickup, Buy Online Pick in store, contactless checkout, and self-checkouts were recently more popular among retailers.

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Retailers tried many customer engagement strategies these days to increase profit. Many of them started e-commerce to support offline stores. Reduced the shipping cost and offered many discounts to attract the customers and to increase sales. They choose many ways in order to cross the target profit margin level. Many failed to achieve the goal and quit the game in between. The global economy was affected very badly. Now the things were changed back and people learned to live with this situation. Wearing masks and using sanitizers is not a big deal for them. The customers are back to the store. Retailers can see the hike in-store traffic and they start to redraw their margins to high.

Definition of Retail Profit Margin

Retail profit margin is nothing but the difference between the actual cost and your selling price. If you buy a shirt for AED 150 from your retailer and sent it to the customer at a price of AED 650, then your retail margin will be AED 500. In the same way, you can calculate your overall retail margin too.

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Retail margin is the synopsis of your overall business strength. If you don’t know this number means you don’t know about your business. Knowing the retail margin is really important. Higher the retail margin higher the profit, but if you make it too high you will fail in the market as your competitors will provide it at a lesser price. You have to put your brilliance in determining the product selling price. While fixing the price you have to consider the sales tax too. You can calculate the gross retail profit by the formula given below:

Gross Profit Margin [%] = {(Total Revenue – Costs of Goods Sold) / Total Revenue} x 100

5 Ways to Increase the retail profit margin of your retail store

If you don’t know the retail margin of your business, just ask your accountant to explain the details so that you can set your goal. Learn the ways to increase the retail margin here.

1.Think before giving discounts-avoid unnecessary discount sales

The frequent discount sale will increase customers, but the fact is customers will always wait for your next discount sale to visit your store again. This won’t increase your retail margin. In the same way, no discounts will also make hurt your business.

 Visibility of all the products in the store can help to reach every product to a customer’s notice. Implementing tools for product information management will help you to do this both online and in-store. If you have a powerful POS software like Retail Pro, you don’t have to worry about the discount sale anymore.

2. Elevate your Brand value by trustworthy service

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Our brands—Nike, Converse, Jordan Brand, and Hurley—are loved by customers all over the world. But we never take that for granted; we know that every day we have to earn their trust—by serving them completely and adding real value to their lives through products and experiences.

— Mark Parker, CEO, Nike

Trust is the basis of every business. Making a customer is more important than making a sale. Quality products and consistent service can make your brand trustworthy.  Loyal customers can act as the biggest advertisement for your brand.

3. Reduce extra operational Costs

Cutting extra operational costs will help you increase your profit margin. To do this you have to watch your store operations keenly. Find out the places where you are spending money for no use. You can implement a footfall traffic counter like “Beyond Traffic”  to analyze your store traffic. Beyond traffic’s employee filtering feature have the ability to differentiate the employees and the customers. Implementing technology in your store can reduce manpower costs and efficiency.  Implementing good POS software can handle your inventory management and reduce manpower in that area.

4. Build a good relationship with your vendors and suppliers

Ordering each item from different vendors will increase the transportation cost and overall cost. It’s better to combine your orders with other retailers in the same area and taking the items from the same suppliers. If the transportation cost is high talk with the supplier for an alternative solution. Reduce the no. of vendors to a few.  A close relationship with your vendor will give you a space to ask for discounts and flexible payments.

Like inventory management inventory security is also important. Implement anti-theft systems to avoid shoplifting and internal shrinkage.

5. Reward your employees for their excellence in work

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Good employees are the pillars of every business. Make your employee happy by rewarding them for their excellence in the work. Feel them like they are recognized for their hard work. You can see it will really reflect in your overall profit margin. You can reward them with personalized gifts.

 Implement a workforce management solution to manage your employee’s work timings. Smart scheduling will help to increase productivity, profitability, and happiness.

Never forget to train your employees to welcome the customers well. Rather than getting sales-focused welcoming customers always prefer a human experience while they visit a store. Greet them with a warm hello will be a better welcoming.

Try to apply these tips in your business. You can see the difference in the coming months. Provide a better shopping experience to make more loyal customers. Run loyalty programs to retain those loyal customers. Adapt to new technologies and update your marketing strategies with time. Retail Profit margin depends on every minute transaction in your business.

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