15 Ways to Increase Retail Profit Margins Part 1

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Retail profit margins have been more relevant than ever lately. It all started with curbside pickup, the only way for many stores to sell their wares during the Covid-19 pandemic. Now, some experts are suggesting retailers add similar programs:


This advice is well-intentioned but misinformed.

If you have the same resources as Amazon, Walmart or Target, great! Add as many bells and whistles to your retail strategy as you want.

But if you’re anything like the retailers I know, you don’t have unlimited shareholder capital. And programs like these require funding — extra costs you’ll have to make up for elsewhere.

The truth is that improving your retailers’ profit margin is a two-step process:

Step 1: Know your average profit margin (and a good margin to aim for). Do not worry. I’ll make it easy for you, even if you’re not a “numbers fan”.

2nd step: Implement my 15 proven methods to increase your retail profit margin – no complicated programs or freebies required.

Ready to start? Good. Let’s dive into it.

What is the trade margin?

“If you don’t know your numbers, you don’t know your business.” –Marcus Lemonis

So what is the retail margin?

If you are an accounting whiz, don’t hesitate to take the plunge. For the rest of us who could use a quick refresher on some accounting fundamentals, here are the numbers you need to grow your business.

Retail Gross Profit Margin is the percentage of revenue that remains after deducting the cost of goods sold. It does not take into account additional operating expenses — that is, net profit.

Your retail margin is a snapshot of the overall health of your business. Plus, it shows how much revenue is going to your bottom line.

If you don’t know your average retail profit margin, make an appointment with your accountant or bookkeeper. Also find out about operating expenses, variable costs and cash flow.

To get a general idea of ​​your retail gross profit margin yourself, here is the formula:

Gross margin [%] = {(Total Revenue – Cost of Goods Sold)/Total Revenue} x 100

Here is a simple example:

Let’s say you buy something for $1. You resell it for $2. What is your gross profit margin?

(I’ll give you a second.)

Did you get 50%? Bravo – this is your retail profit margin for this item.

Many retailers will not see a 50% gross profit margin. Its good. So what is a good benchmark for retail profit margins? We’ll take a look.

What is a good profit margin for retail?

According to Vend’s 2019 Benchmarks report, the average gross profit margin is 53% globally.

This percentage doesn’t tell the whole story, however. Average retail profit margins vary by industry. A luxury jewelry store and a neighborhood grocery store simply won’t have the same average margins.

Here are some industry-based profit margin averages:

  • Supermarkets, wine and spirits retailers: 26-29%
  • Women’s clothing stores: 47%
  • Furniture stores: 45%
  • Baked goods: 57%
  • Sporting Goods Stores: 39%

These percentages are only snapshots of industry averages. This East possible to successfully sell low-margin products – if you follow the 15 tips I reveal in the next issue (September 28).

If you want to improve your profit margins, start by reviewing your numbers regularly. It’s much easier to get to your destination if you know where you’re coming from.

Next time: 15 ways to increase retail profit margins.

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