Even though the markup
on the cost of goods for a typical retail store can be 40% or more, the
profit after expenses such as rent, labor, insurance, advertising, credit
card fees, and maintenance can be very low.
A
National Shoe Retailers Association (NSRA) survey of its members showed
that the average independent shoe retailer only earned an average 3.5
percent net profit.
Even large retail
chains usually only achieve a profit of 2% – 3%. They can survive due to
the extremely high volume of sales that they are bringing in. The
average independent retailer will need to achieve much higher margins than
that just to stay afloat.
Every day independent
retailers close their doors even though they seem to
have very high sales volume. What makes the difference between closing
the door and staying open for another day? It is not just the sales
volume, but getting the profitability that keeps you going. Just a few
percentage points can be the difference between failure and success.
Retailers need to
squeeze everything they can in an effort to increase their
profitability. Some of the key areas that can be target are…
·
Employee Productivity -
Payroll is often one of the largest expenses. It is critical to have well
trained, productive employees. To the customer, the employee that they
encounter when entering the store “is that store”. Does the employee know
the product? Can they make suggestions to the customer and provide
appropriate add-on sales? Is
the
employee able to complete the transaction smoothly without hassle? What
happens when a customer is not satisfied with a purchase they have made?
Can the employee easily perform returns or exchanges in accordance with
the store policies? How are those returns and exchanges tracked and
reported?
·
Inventory Control – If you
don’t have it in stock, you can’t sell it. Does the retailer carry the
correct stock levels? What items are producing the highest volume of
sales? What items are producing the highest profit margins? How do you
know? Which one is more important? Exactly what was your total
shrinkage cost last year? Exactly which items contributed to that
shrinkage? Is the process of creating purchase orders automated and
based on statistical analysis of your inventory movement?
·
Customer Tracking – It is
easier to keep a current customer than to gain a new one. Who are your
customers? Could you contact them all right now, this very minute if you
wanted to? Could you let them know about a sale on the specific items
that they are interested in? Can you
categorize your current and past customers into different categories to
target each group with very specific marketing campaigns tailored to their
exact needs? If a repeat customer walks in can the employee on the floor
converse with them about a previous purchase they have made? Is the
employee aware of issues that the customer had during their last visit to
you store? If you are keeping a customer database already, is the
collection of the data automated so that no one slips through the cracks?
These subjects and questions are all things
that a good Point of Sale system can help you with. It is surprising how
many retailers look at their POS system as only a tool for keeping track
of how much money they bring in. Today’s POS systems can help with all of
the above mentioned areas plus much more.
In the next letter we will talk about how
to select the proper Point of Sale system for you business. We will talk
about what features you need and don’t need as well as a few things to
watch out for when shopping around. See you next time.
Bruce
Bruce McClellan
specializes in Retail and Restaurant Point of Sale systems. Bruce managed
restaurants from Fast Food to Fine Dining for 15 years. He worked in
Software Development and support for MICROS Systems, one of the largest
Hospitality software and hardware providers in the world. He
currently is the Service Manager at American POS Systems, serving both the Retail
and Hospitality markets. You can contact him at
bmcclellan@AmericanPOS.com.
Bruce's resume can be found
here...
American Point of Sale
can provide you with the
latest in Touch Screen POS equipment, Dell Servers, Metrologic Scanners,
Posiflex Terminals, Epson Printers and much more. American Point of Sale
can build a custom solution to fit your exact needs. American POS Systems
provides systems from InfoTouch, Sharp and Comtrex.
Maryland
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