Many businesses often accidentally sell below cost in a tale as old as retail. This is a ticking time bomb for many retailers, particularly in today's world, where margins are razor-thin; understanding the actual cost of your products is required to survive. We had a software user who, until she implemented our Point of Sale (POS) system, did not realise she'd been selling a popular item at a loss for months. Her story isn't unique, but her turnaround is. Let's dive into how to avoid this common pitfall and how to use technology to stop this happening.

The Peril of Pricing Below Cost

Selling below cost quickly boosts sales, but it's a dangerous game as these loss leaders can easily backfire. Here's why:

• Eroding Profits: Every sale becomes a loss, slowly draining your business.
• Setting Unsustainable Expectations: It can only last so long, and you risk losing your customer base once prices increase. Customers who buy as you are cheap do not stay when your prices get real.

How it happens

Many retailers can miss the full impact of pricing below cost because there are many more factors than their purchase price. Consider:

1. Shipping and handling costs
2. Storage expenses
3. Staff wages for handling and selling the product
4. Marketing and promotional costs

When you factor in these hidden expenses, that price might cost you more than you think.

Get Pricing alerts

Our Point of sale software can be set up to issue a special warning if the price of a stock item being scanned is under cost. This warns people scanning that item at the cash register that something is wrong and needs to be checked.

If you feel that you may have a problem here or you want to check if you are selling too many items at huge discounts, I suggest you run the following report. 
 

Press transaction enquiry, as highlighted in red. Now select the relevant options. It is actually a good idea to do it once and then do it again with different departments that appear and check out the results.

How POS Software Can Be Your Pricing Guardian

Our modern POS systems are more than just fancy cash registers. It is your first line of defence against pricing errors and a powerful tool for retail pricing strategy. Here's how:

1. Real-time Cost Tracking: Keep tabs on your actual costs.
2. Automatic Pricing Alerts: Set warnings for items sold below cost or at low margins.
3. Detailed Profit Margin Reports: Analyse which products are your profit heroes and which are the villains.
4. Set Minimum Margins: Establish a floor for your profit margins and stick to it.
5. Regular Audits: Use our POS reports to review pricing regularly.
6. Smart Discounting: When you offer discounts, ensure they're strategic and profitable.

FAQ: Common Pricing and Inventory Issues

Q: How can I quickly identify products that are selling below cost?
A: A sound POS system will allow you to set up automatic alerts for items selling below a certain margin threshold. You can also run regular reports to identify low-margin products

Q: How often should I review my pricing strategy?
A: Conduct a thorough review monthly at a minimum.

Conclusion: Technology as Your Profit Partner

In today's retail landscape, selling below cost isn't just an occasional mistake—it can be a business-ending blunder. But with our POS software and a keen eye on your numbers, you can turn potential losses into consistent profits. What we have is a powerful tool for making informed decisions about your pricing strategy. 
 

Ever feel like your profit margins are a bit of a mystery? You know the numbers your suppliers give you, but those rarely show what is happening in your shop. That's where actual gross margin comes in – a true reflection of your operating efficiency.

For example, here at POS Solutions, we realize that running a successful store in the brick-and-mortar world requires knowledge. Therefore, our point-of-sale software makes monitoring your gross margins incredibly easy, giving you valuable insights to make informed decisions that can boost your bottom line.

Why Actual Gross Margins Matter More

While suppliers often provide "quoted" gross margins, these figures might not tell the whole story. Here's why:

• Markup vs. Margin Confusion: Suppliers might quote a markup percentage (e.g., a 42% figure), which sounds more impressive than a gross margin of 30%. Plus, getting an actual feel of your business profitability will be tough if some items you have are markup and some are gross margin.
• Selective Sharing: Sometimes, suppliers provide margins only for most products and then claim the rest they ignore. Yet even the rest of the items can impact your overall profitability.
• Discounts and Deals: Let's face it, discounts and promotions are a part of retail life. But these can significantly impact your actual gross margin compared to the quoted figure.

Get Instant Insights with POS Solutions Sofware.

Imagine having a real-time snapshot of your actual gross margins at your fingertips. With our user-friendly POS software, that's precisely what you get! Here's how it works:

1. Access Your Cash Register Reports: Head over to your POS software's cash register reports section.
2. Navigate to Sales: Locate the sales reports within the cash register reports section.
3. Unlock the Power of Dissection: Look for a report titled "Dissection Sales / Profitability for a Given Period." 
4. Run the Report: Select the desired timeframe (e.g., the last year) and generate the report.
5. Find Your Profit Percentage: Within the report, you'll see a magic column – % Profit. This displays your actual gross margin, broken down by product or category.

See the Difference for Yourself!

It's that simple! Monitoring your gross margin with the POS Software System takes seconds. Stop relying on guesswork and hidden figures—take control of your profitability today!

Want real-time insights? Contact us today to learn more. We can show you how our POS software can give you the information you require to help you run your business.