QUESTION: I own a retail sporting goods store. My profit margins are declining, and my inventory is not moving as fast as I would like. What can you suggest to reverse this trend?
ANSWER: Steven Strauss, senior small-business columnist for USA Today, says “There are three ways to increase profits: … increase prices, sell more and decrease your overhead.” Let’s analyze each:
Increase prices: Why would a customer pay you more than he or she could to acquire the same item from a big-box store? Personal service is the one area the small retailer can out-shine the competition.
Believe it or not, there are people who put a premium on their time and appreciate having a customer service person who can answer their questions in a friendly and competent manner.
“If you’re worried that a price increase will turn-off your customers, test the new prices first on several popular items before rolling them out across the board,” Strauss suggests.
Sell more: Begin by analyzing which items are in demand, and make sure you have an adequate inventory to accommodate the demand. Promote these items heavily on your website and in the sports section of the local newspaper. You will probably find that 70 percent of your sales come from 30 percent of your inventory.
Create incentive rewards that encourage your sales people to go the extra mile. The 70-30 analysis also applies to your customers. Identify and institute a “valued customer” program.
Offer introductory discounts for new products. The idea here is to develop repeat customers who, while lured by offers of discounts, will purchase other unintended items once they are in your store.
Decrease your overhead: This involves a thorough analysis of your overhead and expenses. Look first at the big-ticket items, such as rent, insurance, labor, and merchandise that has a long shelf life.
If your lease and insurance are due for renewal, try to negotiate more favorable terms. If yours is a seasonal operation, cut back on staff, but not to the extent that it will compromise service.
Talk with your suppliers and try to secure more reasonable price and payment terms. Remember, most everything is negotiable. Your landlord, insurance agent and suppliers are all facing the same competition as you.
Finally, don’t forget to ask for the sale. The Bible says “Ask and ye shall receive”. If you don’t ask, you probably won’t get.
Gray Poehler is a volunteer with SCORE Naples. Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit https://naples.score.org/mentors .The SCORE business office is located at 900 Goodlette Road North, in the Fifth Third branch bank building.