Profit might be the most important performance indicator for retail businesses. What follows are five suggestions to earn more profit for a local, brick-and-mortar retailer in the coming year.
1. Sell Online
Since this site is called Practical Ecommerce, it may not be a surprise that our very first profit-generating suggestion for brick-and-mortar retailers is to start selling online. But there are many good reasons to add ecommerce to your retail business.
First, online retail sales are growing much faster than physical-store sales. Last month, the U.S. Census Bureau released its quarterly retail ecommerce sales report for the second quarter of 2018.
For that quarter, ecommerce sales had risen 3.9 percent over the first quarter, while total retail sales (brick-and-mortar and ecommerce combined) were up 1.6 percent. Compared to Q2 2017, total retail sales for Q2 2018 were up 5.3 percent, but ecommerce sales were up 15.4 percent.
The overall growth in ecommerce does not guarantee that your brick-and-mortar business will get a share of those sales if it adds ecommerce, but it does represent an opportunity.
Second, you may be able to get more out of your employees. If your local store has slow periods, idle employees could be processing online orders or adding products to your ecommerce site.
Third, having your products online might boost physical-store sales. Many shoppers look online before they shop in-store.
2. Master Google My Business
Google My Business is a tool to manage how a company is presented on Google Search and Google Maps. Google My Business is the foundation for local search engine optimization.
An effective Google My Business listing may increase your retail store’s chance of showing up for local searches or appearing in what SEO professionals call the local pack.
This is important because the volume of local, mobile, and voice-based search is increasing.
In May 2018, Google reported a three-fold increase in mobile searches (over the past two years) containing the phrase “near me.” Google also reported an 85-percent increase in mobile searches that include the phrases “where to shop” and “where to buy” between the first six months of 2015 and the same period of 2017.
Many of your local store’s potential customers are looking online (particularly on the mobile search). If you can improve your store’s local SEO, you should be able to get additional shoppers to visit. With additional visits comes the opportunity for more sales and more profit.
3. Increase Average Order Value
Average order value, which is sometimes called “average market basket” in brick-and-mortar retailing, is a measurement of the average amount customers spend each time they make a purchase. To calculate it, simply take your business’s total revenue for a given period and divide it by the total number of transactions during that same time.
If you can increase your store’s AOV, you should also be able to increase profit.
Every transaction has associated costs. In your store, you have to pay overhead and labor. Online you may need to pay for shipping.
When you increase how much revenue you generate on each sales transaction, you typically increase profit.
4. Buy Better
All of the marketing and advertising in the world cannot help your brick-and-mortar retail business if it has too much costly inventory.
If shoppers really don’t want, say, a combination avocado peeler lug wrench, you might be stuck with too much inventory that won’t sell even at closeout prices. Having to close out or even give away merchandise kills retail profits.
Similarly, if your store only brings in 10 of this season’s hottest-selling items and all 10 are gone within hours of when your store opens, you may have missed out on sales. Could you have sold 20, 50, or 100?
This is the retail buyer’s dilemma. Don’t buy so much inventory that you have to discount it to get rid of it. Don’t buy so little that you miss out on sales. You want just the right amount.
This is easier said than done. But if you want to increase your store’s profits in 2019, focus on inventory management.
5. Advertise Wisely
A thoughtful, well-executed marketing and advertising campaign will drive sales for your retail business. But careless, untested advertising will destroy your profit.
John Wannamaker, a nineteenth-century retailer, is supposed to have said that “half of the money I spend on advertising is wasted; the trouble is I don’t know which half.”
In 2019, you can do better. You should have a good idea of the performance of nearly every dollar your business invests in marketing and advertising. Buying a particular ad should generate trackable sales.
Experiment. Try new promotions. But if you want to create more profit for your brick-and-mortar retail business, measure every ad you place and every marketing campaign you try.