So today we will be looking at the 4th step in increasing retail store profits.
In the three previous ones we discussed:
- Personal performance of an entrepreneur
- Business management through KPI
- Proper financial management
Now is the time to analyze the subject of sale itself – namely the goods. And first of all, bring supply and demand into line. And at the same time, set up the correct width and depth of the assortment.
Why is it important to do this at this stage?
The thing is that if your product offer does not match demand, you will not be able to increase profits, no matter what efforts you make. As you understand, a person comes to your store for very specific goods. Moreover, he needs a product of a certain color and size. And here it is important to correctly calculate how many people will come for completely different combinations:
- Prices
- Size
- Colors
- Etc.
And all of this applies to every category of product you sell.
Thus, if you do not want to invest money in “illiquid assets”, and, on the contrary, want the maximum number of customers to find the combination they need in the store, it is necessary to match supply and demand.
How to do this?
There is a method of so-called ABC analysis. It is based on the Pareto rule. This is when 20% of the causes are responsible for 80% of the results.
In practice, this process looks very simple. I use a certain template for this with my spain telegram data clients. We upload all sales for the last quarter, month by month, from 1C to Excel. Then we press a couple of keys and the data turns from an unordered table into data suitable for analysis. In principle, you can calculate all the same manually.
The result of this simple combination is that your sales will be divided into 3 groups:
Product group A — products whose cumulative total shares make up 50% of the total sales. You should always have these products on sale, in the right quantity, color, and size. They require weekly planning, accounting, and control. It is by this product group that your customers find you. It is the products from this group that can be used to attract customers.
Product group B — products whose cumulative shares amount to 50% to 80% of the total sales. This product is in significantly lower demand. Monitoring of this product group is monthly.
Product group C — products china leads whose cumulative total shares make up 80% to 100% of the total parameters. This is an image product. Due to the low sales speed, the markup on this product should be higher than in the previous two.
Now that you have found what is upsell and how to out which product groups and how they were sold during the quarter, compare this with your inventory. To do this, we upload the inventory balances in money to the template used and get another form for analysis and comparison.
The next step is to compare whether the condition of your warehouse corresponds to what people come to you for. And if it does not, it is worth fixing the situation as soon as possible. As you understand, in order to have money to buy category A goods, you need to get rid of illiquid assets – goods of group C. If the condition of your warehouse consists mainly of goods of this group, you have big problems.
Also, if you have the same markup on all products, you should change this situation and markup the product from category C higher.
And only at the moment when you can satisfy your customers’ demand as much as possible, you can use the tools to increase profits. In this case, they will work as efficiently as possible.