Increment Your Profitability Margins

In my experience, retailers pay too little attention to the margins. Yet it’s at the margins where many profitability opportunities reside.

• In pricing, profit margins, not the prices themselves, are what pay the bills. Therefore, monitor those margins and adjust them at regular intervals. Remember to drill down as close as you can to the SKU level rather than set the same margin for all items in a class. Dissect the product class. For some items, you’ll need to set minimal margins in order to keep footsteps coming into the door. Where are the opportunities to compensate for that by raising the margins on other SKUs? For example, setting relatively higher margins on multifunction merchandise actually increases product credibility. 
• In employee selection, look for the ways in which certain candidates have marginal strengths compared to the others. Yes, all employees must meet minimal standards, such as having retailing skills and showing mastery of safety procedures. But if you’ve a number of applicants, the decision making is more likely to be valid if you focus on the margins—the distinctive strengths. 
• In employee coaching, continue to focus on the strengths. The changes most likely to succeed for a retailer are gradual and based on the retailer’s existing strengths. When you’re scheduling employees, when you’re considering employees for special assignments or promotion, when you’re needing to lay off employees, you’ll look at the margins again. What are the distinctive assets and liabilities of each individual? 
• In day-to-day management, notice the exceptions. This tactic is at the heart of Total Quality Management. A retailer doesn’t have the time, mental energies, or other resources to monitor everything at once. You must master the skills of selective neglect. You can get it all done, but almost surely not all at the same time. So set clear expectations of how things should be going and then monitor for the marginal deviations. Those will draw your attention. This doesn’t mean to become preoccupied with the exceptions in ways that immobilize you. Take action assuming what’s true most of the time, not on the expectation of exceptions. Then correct as you progress. 
• In your management strategy, always be seeking the retailer’s edge. What distinguishes your store from the countless alternatives your target consumers have for spending their money and time? 

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Drill Down to Do Item-Level Pricing 
Set Healthy Margins on Multi-Solution Products 
Base Your Changes on Your Strengths