There is no silver bullet, no one panacea that is going to fix Gross Margin
Resist thinking only about Gross Margin, Product and Price. It’s not just about product and price, It’s just as much about perception. Put more emphasis on developing a reason for customers to come into your store when there isn’t a promotion running.
Know how you are perceived; provide the best shopping experience; employ a variable pricing strategy; be consistent
There's many aspects you should consider to maintain an acceptable margin and steps you can take:
- Any change that increases sales while decreasing expenses results in increased profit margin
- Raising your price per unit while the cost of goods stays constant can produce profit margin gains
- Selling more units can have a similar effect but if the product costs more to acquire, the extra sales may not create the increase desired.
- Offering lots of Multibuys won’t suppress your GM. Selling everything at a very low margin would.
- Reduced expenses add to bottom line profit. The greatest gains are made when fixed expenses remain constant e.g. wages at 18-20% of sales, and sales soar. A lot of companies also keep administrative expenses tight because these activities don’t directly contribute to revenue
- Increase prices on selective items or ranges
- Review slower moving items. How important are they? Could shelf space be devoted to fast moving, profitable lines. Narrow your focus.
- Don’t teach customers to wait for the next sale! If you are always discounting to get a deal, you’re robbing yourself of profit. Every retailer needs a Promotion Plan
- Limit wastage – we advise to about 1% of sales
- Schedule employees according to need not according to their convenience
- Manage your supply chain. Support your most important suppliers and re-negotiate contracts
- Sell added value – people don’t want the hassle of figuring things out for themselves or screwing up their gardening endeavours
- Know your best customers and spend time with them
- Balance your marketing to ensure your advertising is not skewed to lower price items to bring more customers in the door
- Know who your high-end customers are and market to them. Allow products with lower margins to be the alternatives.
- Add product lines that command higher prices than those you currently offer – so long as brand consistency isn’t compromised
- Present products with professionalism using merchandising principles and techniques
- Remember the perceptions of a good operator - Housekeeping and Fairness.
These are reasons why it’s important to focus on everything you do in a garden centre to contribute to sales – there is no silver bullet, no one panacea that is going to fix Gross Margin
- Joy Lamb