Profit maximization stems from two critical areas: increasing sales and decreasing costs. Sounds simple in theory, right? However, accomplishing these goals can be tough. Today’s fickle consumers have more options than ever for where to shop and how to buy, making them difficult to attract and tricky to keep. And costs for inventory, labor, and infrastructure continue to increase.
There are some simple steps that you can take to improve your retail operations, earning you more business, increasing efficiency, and improving your bottom line.
1. Determine your key performance indicators (KPIs)
It’s hard to know if you’re improving without knowing where you’re starting. Key performance indicators (KPIs) are metrics you can measure to assess progress toward a business goal. Your point of sale system (POS) holds the key to a lot of this data.
To get a better understanding of your retail operations, start by reviewing the following areas:
- Total sales
- Sales by store
- Best selling items
- Worst selling items
- Average sales per employee
- Conversion rate
- Inventory turnover rate
- Cost of goods sold
Once you establish objectives in each of these areas and the KPIs that reveal your business’ performance related to them, you will be able to identify areas of your business that need improvement or a shift in strategy.
2. Automate, automate, automate
Time spent on tedious tasks is time that could have been better spent on higher impact areas of your retail operations. Fortunately, many automation tools are built into your POS, so capitalize on those efficiencies. You can easily use your point of sale system to track expenses, manage timekeeping and payroll, and maintain inventory.
Look for POS systems with these features and ensure they integrate with your back office applications. For example if your accounting platform and your POS integrate, you’ll save time and avoid errors that can occur when transferring data.
With these more time-consuming, repetitive tasks automated, you’ll be more efficient and better able to devote time to other areas of your business.
3. Optimize inventory management
Take a data-driven approach to managing inventory in retail operations. Your POS system can reveal areas where you can improve. For example, by knowing which items are selling most, you can ensure they are always in stock, preventing any lost sales due to low inventory.
Understanding which items aren’t flying off the shelves is also valuable information. Reducing or eliminating these products from your inventory will lower carrying costs and allow you to dedicate that shelf space to better selling products. It can also provide you with the insight you need to move inventory without having to mark down—such as which items to bundle so you can move lower-selling items along with best sellers.
Another critical part of lowering costs is conducting regular inventory checks. Stock checks will help you quickly uncover errors or missing goods reducing costly shrinkage.
4. Evaluate the shopping experiences your business provides
Customer acquisition is expensive. In fact, the Harvard Business Review states, “It’s anywhere from 5 to 25 times more expensive to acquire a new customer than it is to retain an existing one.” In light of this statistic, it makes sense to focus attention on customer retention by providing the types of shopping experiences your customers are looking for.
Offering a loyalty program is a great way to enhance shopping experiences. Your POS system should empower you to reward loyal customers, as well as tie your in-store rewards with email marketing and other campaigns. Offering complimentary features such as free Wi-Fi can also mean better, loyalty-building experiences for your customers.
Your staff also has a major impact in customer retention. Consistently provide all staff with customer service training and ensure that recruiting efforts bring in top talent to serve your clientele.
Evaluating your business’ performance in these four areas can reveal changes that must occur to improve efficiency and customer service—and, ultimately, profitability. In the current, competitive retail climate, it’s time to take stock and make sure your business is in the right track.
