With the increase in online shopping and big box retail stores popping up on every corner, specialty retailers need to leverage their Point-of-Sale systems to help protect their profits. Listed below are a couple important things you can do with your POS system to not only protect your profits but increase them.
- Pricing- Avoid Discounts and Increase Prices
- Assuming a 40% margin, if you reduce your prices by 10%, you need to increase your sales volume by 33% to break even. Further, if you reduce prices by 20%, you have to sell 100% more; by 30% - 4 times the sales needed, and if you decrease prices by 40%, you will never break even.
- Don’t fall into the discount trap in trying to compete with the prices online or at big box stores. You have something they don’t – The ability to provide superior customer service. Most customers are willing to pay a premium for convenience and good customer service.
- Determining what your prices should be can be overwhelming. Since every retailer is different there is no one sure method. Below are a few popular pricing methods.
- Markup Pricing - Simply adding a percentage to your cost to get a certain margin or markup on the product.
- Using MSRP – Many retailers simply use the Manufacturers Suggested Retail Price. Try adding to the MSRP as in one of the sample charts below:
- Competitive Pricing – Research what your competition’s prices are and charge a little more because you offer superior customer service.
- Psychological Pricing – Instead of charging $10 for an item, charge $9.99. I know this sounds like a big box store methodology, but it works!
- Above are just a few pricing methods that should work for you. Further, your POS can help you, by automatically setting prices using one of these methods. If you are unsure of which method to use or how to configure your POS, let us know.
- Increasing Units Per Transaction
- Increasing your UPT has multiple benefits: It increases your revenue and builds customer loyalty by providing them everything they need.
- Imagine yourself as a customer getting home from buying a new electronic device, excited to start using it, and discovering it needed batteries. You would be upset that the sales person didn’t inform you that you needed batteries and would likely go buy batteries at the nearest place rather than going back to the store where you purchased the electronic device.
- Having staff who is well-trained on all products is essential, and you can leverage your POS to suggest add-on items for each item sold.
- Protect against Fraud
- Customers and Employees alike can really hurt your profits by taking advantage of you if you are not vigilant. A couple common fraudulent activities and how to help prevent them:
- Customer purchases 1 item and steals more of the same. This customer would then come back to the store to return 1 of the items, and possibly again and again to return multiples of the same item. Having a return policy that requires a receipt is a good start, but you must use your POS to track all returns against the original receipt, so the POS tells you when a receipt is already returned against. Also, requiring customer information be entered into the POS for all returns is a good way to capture customer data and be able to track trends and market to them.
- An employee rings up fake returns and returns the money as either cash or refunds their personal credit card. This one can be tricky to catch if you are not regularly monitoring the reporting that your POS and credit card processor should have. The first step is to run reports regularly that show, by cashier, the total of their returns, the tender type, and compares with other cashiers to detect any higher than average rates of return. If something looks questionable, you should run a transactional credit card report that shows the last 4 numbers of the credit card to find any patterns to investigate further.
- Gross Profit Margin
- Establish a target Gross Profit Margin – Every business is different and this target may be hard to establish. There are a number of resources online to help you identify what your target should be based on your type of business. If further help is needed, a retail consultant should be able to you establish this target.
- Run Gross Margin Reports – You should run these report every day to see if you are hitting your goal. You should look at these reports in summary and drill down into the different departments and classes of product to identify any problem areas.
- Resolve any issues to hit your target
- Did a cashier take a discount on an item?
- Do any items have pricing errors?
- Is your pricing strategy ineffective for a class of product?
These are just a few ways to utilize your POS system to help you keep your business profitable. We hope this helps illustrate how important it is that you set-up your POS properly and implement policies with your staff that enables you to capture data that allows you to properly analyze and manage your business.