Maintaining a healthy retail profit margin is more crucial today as everything is changing now. Suppliers are adjusting prices that were artificially kept low during the COVID-19 pandemic. Additionally, with inflation, higher hidden taxation, and persistently high interest rates, SMB retailers are facing increased costs, which is causing erosion of their profits.
Why Margins Matter
A margin is the difference between your cost and selling price. Any drop will have an impact on your profitability.
How to Review and Track Margins Effectively
Establishing a Proactive Margin Review Process
Margin protection starts with how often and how thoroughly you review your numbers. Relying solely on ad-hoc checks from time to time is a dangerous approach. With a POS system, it is easy and quick to do so. Why not schedule a monthly margin review for your shop? This will allow you to identify pressures early and take corrective action before profits slip away.
Leveraging POS Technology for Margin Protection
Modern POS systems can simplify margin management. For example, reports like “Quantity On Hand and Price Check” display your margins in a clear, list format. Use this report to identify low-margin items quickly. Then ask yourself why they’re so low.
I find it better to do it department by department.
Regularly reviewing this report empowers you to take timely action and protect your profit margins.
Ready to Protect Your Retail Profit Margin?
First, you must look into your business and run the numbers.
Now I suggest you run "Quantity On Hand and Price Check" report.
This shows your margins. It makes it quicker to check as it is in a list.
Benchmarking: Stay Competitive
Don’t operate in isolation. Checking your figures against those of similar retailers in your area can also be a helpful exercise. If your prices deviate significantly, you need to investigate. A quick walk around the area, plus a study on the internet, can tell you what you need to know.
Action Steps for Retailers
Achieving sustained profitability in retail requires a continuous commitment to margin management. Here’s how to get started:
- Set a regular monthly review schedule
- Leverage your POS technology, have you set up automatic margin tracking
- Review pricing and promotions
- Compare your performance to industry standards.
Improving your profit margins was good, but it's necessary now.
