How Retailers Can Improve Their Profit Margins
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How Retailers Can Improve Their Profit Margins

When you subtract all your business expenses, the cost of materials, and overheads from your revenue – you’re left with profit. This figure can vary dramatically from business to business, and is a pretty good indicator of how successful it is.

In retail, some of the biggest brands commonly achieve profit margins of 50-60%. In 2017, Ted Baker had a profit margin of 60%, Inditex 57%, and M&S 56%. Your goal as a small retailer could be similar or much more ambitious, here’s how to make it possible.

Monitor your expenses every month

Whatever your main outgoings, keep a close eye on them. Staffing, rent, utilities, and stock should be affordable enough to give you plenty of room to make profits on top. If producing a product becomes 10% more expensive, that’s 10% of profit gone. Prioritise and keep an eye on the numbers every month, instead of every year or quarter.

Think before you discount

Reducing prices can ensure that your stock is sold fast, but it can also damage your profits. It’s got to be worth it. For fashion retailers like Zara, it’s all about knowing their stock and what sells quickly. They reduce prices when they’ve already got newer stock ready to go, not simply because they want customers to think they’re a bargain.

Know your inventory and what historically sells well before you start discounting.

Automate operational costs

Getting products into your shop can be one of the most expensive costs you come up against. Analyse every step of the process and see where you can cut costs. Automation, like a point of sale (POS) system, will manage everything in one place, cutting down the amount of time you need to spend checking up on operations.

Make upselling easier

Increase the average order value and your profit margins should improve. One approach is targeted marketing and emailing – segment your customers depending on what they buy and recommend similar products. If you’re purely bricks-and-mortar, it’s all about service. Have product combinations and recommendations ready to go, and customers will be more likely to buy more in one visit.

Capify provides business funding that’s quick and easy. If you want to invest in a new POS, transform your operations, or buy new stock, talk to us. We offer upwards of £3,500.

Find out how much you could raise for your business today.

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