This Episode: Increasing The Margins In Your Retail Business
As an independent retailer, being savvy about maintaining, and increasing your margins is a critical part of running your business. In this episode, Bob will teach you four strategies to make more money by significantly increasing your margins.
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Hi, I’m Bob Negen. And in this episode of Real Retail TV, you’re going to learn four ways that you can increase the margins in your retail business.
Margins are such a critical part of your retail profit picture. High margins, higher profits, lower margins, lower profits. And being savvy about, not only maintaining, but increasing your margins is part of what you should aspire to as an independent retailer. It is just– it’s that important. And in this video, right now, I’m going to show you, not only how to maintain your margins, but how to raise your margins.
And the first way is to increase your prices. And I love price increases. I’d love charging what you’re worth. And I know that a lot of you are afraid of charging what you’re worth.
But so here’s what I want to say. That when you strategically price, you’re going to increase your margins. I’m not going to go into it right now, but there is another Real Retail TV episode called “The Three Rules for Profitable Retail Pricing.” And I want you to watch it, please.
There’s so much money in understanding how to price your merchandise. If you haven’t watched it, make sure you do. If you care about your success, make sure you do.
The second way to increase your margins is to find more items that have higher margins. I know that a– seems like that kind of statement. But it’s true. Don’t be a victim. Go out and find stuff.
Find stuff at trade shows, high-margin good at trade shows. At trade shows, you find the high-margin goods in the corners, in the edges, with the new vendors. You find high-margin merchandise at the off-price shows. These shows are worth the investment of your time and travel. Because you’re going to find lines and categories that get great margins.
You can create your own private label line. And when you create your own private label, you can charge whatever you can get. And no one is ever going to be able to price shop, right. Because you’re the only person around who sells that line.
And you can also buy closeouts. Took me years to recognize this, to learn this. But your vendors, your manufacturers, your wholesalers have the same problem that you do. They overbuy and they’re stuck with goods that they can’t sell. So if you develop relationships and you become known as a person who likes to buy closeouts, you’re going to get some great deals.
Here are two strategies to get more closeouts. The first strategy is the lump sum strategy. That’s when you call all of your vendors– and I’m just going to use the number, $10,000. You call all your vendors and you say, look, I have $10,000 that I’m going to spend in the next week. Not just spend, pay cash.
Lock, stock, and borrow, cash on the barrel head. I’m going to spend $10,000 with one vendor. The vendor who gives me the best deal. So what, everybody sharpens their pencil, everybody has merchandise they want to get rid of.
And so you take a look at all the offers. You pick the best one. You spend $10,000. So you’re getting the goods cheap, cheap, cheap. You can sell them at a markdown and still get great margins.
The second strategy is the share it. And so what happens in that strategy, in the share it strategy, is you call all your vendors and you say, look, I’m going to spend $10,000 next week. Whoever gives me the best deal or wherever the best deals are, is where my money goes. So with the share it strategy, you have the opportunity to buy $5,000 from this vendor, $2,000 from this vendor, $3,000 from that vendor, and $1,000 from that vendor.
The third strategy is to buy better so you have less mark downs. This is why you should work with a professional planner. So think about this. One of the biggest killers of margins is mark downs.
So you buy all these goods. And at the end of the season, you bought incorrectly. You have to put a lot of it on sale.
Say the holidays, so you buy all this holiday goods and it’s supposed to have this margin. But at the end, you’re way overstocked. So you have to sell stuff at 20%, 40%, 50%, 70%. Shoot, some stuff you have to dump or donate. So by buying better you will have less markdowns and higher margins.
The fourth way to increase your margins is with vendor partnerships. And the key word in that statement is “partnership.”
Let me tell you a story. We have a client and a friend who has a multimillion-dollar business. Multimillion, multi-store retail business, and one year a couple years ago he made it his mission to increase his margins. And here’s what he did.
He called all of his vendors and said, look, I need to make more money. What can you do and what can I do for you? What kind of partnership can we create so that you benefit and I benefit. I’ll sell more of your stuff if I can get better margins from your stuff that I sell. So he went around and he just asked all of his vendors.
The key thing here is he asked. He asked to create a partnership. And some people couldn’t do anything for him. That’s OK. That’s OK.
But some people were really aggressive in the way that they wanted to work with him. And that was better. So just by asking, by being proactive, and creating partnerships, our client was able to increase his margins by three entire points in 90 days. Three entire points, this is huge.
So your action item, should you choose to accept it, is to go through this list. And ask yourself, what am I doing now? What can I do better? And what needs to be done?
You might want to do like our client said, and make it a mission for the next quarter. To say, I’m going to increase my margins by 1, 2, 3, 4. I don’t know what the number is. Or you may just want to say, I am going to be aggressive about increasing my margins. But there’s too much profit potential for you to be passive about your margins.
There it is. Four ways for you to increase your margins. I just want to share with you that there is a lot of money in what you just learned in the last 10 minutes or so. I encourage you to act on this information. And turn it into something.
If you don’t have the retail mastery system yet, I would encourage you to make that investment. Because between the assortment planning module, and the inventory management module, you will get a really great, great idea on how to increase your margins. But you’ll also learn how to think about your merchandise, and how it’s priced, and how it’s bought, and how it’s managed in a way that will make you a lot of money. And really, really do good things for your business.
So if you want to learn about that, go to RetailMasterySystem.com. Until next time, I’m Bob Negen. I’ll see you later.