Jeweller - July, Edition I 2020

BEST OF BUSINESS
Feature
Five methods for maximising
profits on all stock
Profit margin is a metric that should always be on a retailer’s radar, and for good reason: it answers critical
questions about your business. FRANCESCA NICASIO reports.
A profit margin isn’t just something
that retailers should measure; it’s a
metric that retailers should strive to
continuously improve.
As author Doug Hall wrote, “If your profit
margins aren’t rising, chances are your
company isn’t thriving.” To help do just
that, here are some pointers that can
enable retailers to widen their margins:
Lower the cogs
Take a closer look at all materials and
procedures required to create or source
your products and establish how these
materials can be purchased for less
without compromising the quality.
Is it necessary to order larger
quantities? Are there any middlemen or
administrative expenses that can be cut
from the process?
Consider these things carefully and
then take action accordingly. Let’s
say a retailer needs to increase order
quantities for a particular item to lower
its price.
In this case, the retailer should first look
at inventory data and determine if he can
afford to order certain items in bulk.
If not, would it be possible to consolidate
orders with other items or team
with other purchasers to increase
buying power?
This is something that large retailers
have been doing for quite some time now.
A few years ago, for example, Walmart
sought out co-purchasers for raw
materials so the chain could consolidate
purchases and get more buying clout.
Explore options and run them by
suppliers to see if better deals can be
negotiated. If suppliers won’t budge,
don’t be afraid to check out other
suppliers to find out if they can offer
more favourable terms.
Make sure existing suppliers are aware of
this though, as they might end up offering
better rates.
Increase prices
Setting prices at a higher level enables
retailers to make more money on each
sale, thus increasing margins and
improving the bottom line; however,
retailers can baulk at the prospect of
Do you want to
sell to shoppers
who would take
their business
elsewhere just
because they
could get an
item for less,
or would you
rather attract
customers
who don’t base
their purchase
decisions solely
on price
increasing their prices out of fear that
they’ll lose customers.
Pricing decisions depend on each
company’s products, margins and
customers. The best thing to do is to look
into your own business, run the numbers
and figure out your pricing sweet spot.
On top of considering basic pricing
components like costs and margins, look
at external factors such as competitor
pricing, the state of the economy and the
price sensitivity of target customers.
Also take the time to consider what types
of customers you want to attract. Do
you want to sell to shoppers who would
take their business elsewhere just
because they could get an item for less,
or would you rather attract customers
who don’t base their purchase decisions
solely on price?
It’s surprising to find that the majority
of your regular customers may actually
belong to the latter group – a study
by Defaqto found that 55 per cent of
consumers would pay more for a better
customer experience.
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