Growing profit in difficult times

In this period of extreme uncertainty, where customer footfall is down and many retailers are struggling to adapt to the new normal, it is important that every business is focused on growing their bottom line wherever possible in order to maintain maximum flexibility and financial security.

Controlling costs

Clearly when times are tough, looking at existing costs is an important exercise to help retailers identify any areas at all where they could reduce their outgoings and help their bottom line. If you haven’t done so already, why not do a run through of any and all bills and direct debits that leave your business account so that you can identify anything that you no longer need, or no longer feel is contributing directly to the bottom line. It’s worth examining everything in your business and renegotiating or reducing where you can.

It may also require some tough decisions about staff costs and looking at ways that you can potentially work around reduced footfall by consolidating your hours and therefore staffing costs.

If you haven’t already done so, speak to your accountant about any and all entitlements that you may have in terms of government support. Make sure that you’ve exhausted all potential possibilities when it comes to getting financial support to help you make it through this time.

If you are a member of a business improvement district or other local organisation, make sure you’re reaching out to them to see if there’s any additional support for your area or any other suggestions that they might have to help you.

Keep stock under control

One of the biggest outgoings in your business will be your stock. Therefore it’s imperative that you take time to comb through your plans for purchasing any new stock and make sure that everything that you are buying is absolutely necessary.

Before committing to additional stock, put together a plan that outlines how much you think you can sell in the next couple of months and therefore how much stock you think you need to have.

Some shops will have excess stock left over from the lockdown period. It’s likely what you will find is that you will have some areas with bottom-up stock and some areas where you will need to rebuy. In this case, all you’re trying to do is control your costs; make sure that you’re focusing on the areas where you absolutely need more than stock replenishment and avoiding putting any of your money into areas of the business where the stock isn’t moving as quickly.

If you have already committed to orders, make sure that you are double-checking everything to make sure that it is the most relevant product for your business right now. If you placed an order a while ago, make sure that you review it to ensure that it’s the correct stock coming into your business. Retail businesses in general cannot easily afford to be carrying the wrong kind of stock and that is even more applicable now.

While we are talking about stock that isn’t moving quickly, take the time to go through your current stock and look for areas or categories or product types that aren’t moving and see if you can look to clear those through to release cash and improve your cash flow.

Consider a stock clearance sale to get rid of any areas where you have excess stock, especially anything that won’t be as relevant as we move into the autumn/winter season.

Retailers often worry about running sales as they are concerned that it may damage the brand. However there’s a big difference between repeatedly discounting which can be brand-damaging and having a genuine stock clearance sale that allows businesses to clear out unproductive inventory and release cash back into the business.

If you are planning on running a sale to clear stock, your best bet is to go for deeper discounts than the typical offer, so for example up to 50% off. Make sure that you are promoting the sale to customers making it very obvious in-store and and ideally running it for a limited period of time so that the customers know that there’s an urgency to them purchasing.

Meet your customer where they are

If you haven’t analysed your sales recently, this will be a great time to do so. One thing that you need to do is look for any ways in which customers’ buying patterns have shifted over the past few months and make sure that you are adjusting your shop and your purchasing to meet those changing needs.

One of the most important jobs for retailers is to meet their customers where their customers are now. This could mean several different things. Firstly, making sure that you understand which categories and types of products are selling better now than previously and adjusting your stock accordingly.

You can also relate to where your customer is purchasing. How has your customer moved between the online and offline elements of your business? Have a think about ways in which you can meet your customers where they are shopping now. Are you using your digital presence to its full capabilities? Are you encouraging your customer to shop both online and offline? Is there anything else you can do to encourage the crossover between online and offline purchasing? For example, can you offer Click and Collect to local customers? Is this all set up in such a way that the website URL is easily visible? Can you incentivise customers to use your online store?

Go for full price sales

The best way to maximise your profitability during this difficult time is to focus as far as possible on full price sales. As I mentioned earlier there is a place for a stock clearance sale, a short sharp event where you are discounting unproductive stock to clear up, to clear out and make room for the stock that your customer really wants.

However, where possible you want to be avoiding discounting especially when it is done in a distressed and unplanned way. Focus instead on cultivating full price sales from customers. Part of that is about meeting your customer where they are.

Customer behaviour has changed. Therefore one of the best ways for you to get on top of your full price sales and understand where your customers are now is to analyse your sales. The best way to grow your full price sales is to have products that really resonate with your ideal customer and to offer more of what they love and less of what they don’t.

It’s important that you also don’t lose sight of the most important people in your business – your loyal customers. Have you reached out to them recently? Getting in touch with them and offering them what they need is more important than ever when you are trying to boost profits.

Measure your key metrics

Finally, keep focusing on your key metrics. For example, as well as tracking your sales, are you tracking your conversion rate? In other words, the percentage of customers that purchase when they come into your store. It is very important that you monitor this information to help track what is happening within your business.

Make time on a monthly basis to analyse your sales and make sure you are continuing to clear out slow stock and capitalise on your best-selling lines as well as tracking your key metrics such as conversion and footfall.

Ultimately growing your gross margin during difficult times is no different from growing it at any other time. It relies on you using your skills as a retailer to keep giving the customer what they want. Meeting your customer where they are now and offering them something that perfectly meets their needs will keep them coming back and help you grow your bottom line.

JOIN THE CLUB: Catherine Erdly’s new Resilient Retail Club is a supportive community of independents that enjoys essential training and advice to grow and scale their businesses. www.resilientretailclub.com

Catherine Erdly is Founder of Future Retail Consulting