Managing profit margins on the retail roller coaster

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The last two years have been particularly difficult for the furniture industry. Retailers have worked too hard over the past two years to increase profit margins where they should have been and where they need to be.

If you’re like many retailers right now, your warehouse spaces are probably packed. Even if you’re not overstocked “on paper,” backorders or delayed orders arrive just when consumer demand starts to slow, and you have nowhere to put them. Does this scenario sound familiar to you?

What can you do? The one thing you should NOT do is start generalizing discounts to displace products, or your margins will plummet. And NEVER belittle bestsellers. These are your best sellers for a reason.

When planning your next promotion, avoid huge storewide discounts unless you’re only doing it for a one to three day period. A more cost-effective way to do this is to highlight “huge savings in every department” rather than providing savings on every item in the store.

Contact the provider if you need to highlight savings on a particular line. It is worth contacting the seller to see if they will participate, whether through cost discounts or a cooperative refund. And don’t forget the spiffs! Giving bonuses to sellers for selling particular products is a great way to help move products through your store.

As business calms down, profit margins will be key to profitability, and guess what? They always have been!

What can you do to prepare for the next turn of this business roller coaster? Be ready! Taking the time to plan now will go a long way in helping you deal with the next business hurdles on the horizon.

  • Review your revenue projections and adjust your planning if necessary.
  • Properly size your inventory.
  • Scale your staff to the right size, especially your non-sales staff.
  • Make sure your gross margin data is correct. Many retailers struggle to incorporate freight surcharges, for example, into their cost of goods. This results in overstated margins, which can be dangerous as they attempt to cover increased operating expenses, especially if sales begin to decline.
  • Accelerate your revenue-generating processes such as sales training, door-to-door selling, and improved visual merchandising, all of which are necessary to increase close rates and average tickets—both essential metrics to increase your revenue. in-store and online business. traffic softens in the future.
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