Making management jobs easier
Maximizing your POS for profit
When you visit some people’s home and look at the room where they store their rods, reels, tackle boxes, lures and other related items, you ask them to tell you about all that they have. Listening to the person, they explain how each of the items were purchased for a specific type of fishing.
All of these “tools” are needed to maximize their fishing experience. Having had that experience with a friend recently, my thoughts drifted to the store that sold all of this to my friend and their point of sale system.
The difference in the point of sale system and my friend’s home is that the POS has all of the tools in it when it is purchased. The owner or manager of the store has to make the decision to use the tools. Unfortunately, too many stores leave the POS like a wall full of lures that have never been in the water; the potential is there but the results are not.
Your store can increase profits in three ways; controlling expenses, increasing sales, and increasing margins. The point of sale system you have can help with all three. Let’s look at a few examples of how your POS can help your business.
Want to control expenses? Let’s start with looking at the information from your POS with regard to the sales per hour and sales per day. Examining this information over multiple months, you should see a pattern of when you have the most and least sales.
This information can do several things for you. The first is that it will help you to schedule your staff to have the most coverage on the sales floor when you have the most customers.
As you look at the sales, you are definitely going to find when your sales increase and decrease each day. This can help you determine the hours for your store. However, note that many stores have little sales in the first hours and the last hour they are open. Deciding to diminish your hours because of this frequently causes the next hour to decrease in sales.
Increasing sales, the second component, can happen by looking at reports that tell you what is happening in each department/category of merchandise. How much square footage is that department getting on your sales floor? Could you increase sales by increasing the square footage?
Where on the sales floor is this department located? Customers walking into a business generally will look to the right and walk to the right. What is on the right as you enter your store?
Making changes to where departments are located and how much space each department occupies can change the sales makeup of your store.
You can also look at categories of merchandise that are producing sizable profit with the intent of looking for new items to add to the offering. The key in adding these new items is that you are increasing your overall sales and not just splitting your existing sales between more items. Additional inventory should increase sales; not divide the sales between the increased product offering.
The POS also has the ability to forecast your inventory needs. As compared to the concept of stock replenishment, utilizing the POS to determine your needs for several months will do a lot to make sure you have what your customers are asking for. At the same time, having too much inventory sitting on the shelf is an expense as it represents money that is stagnant, an expense, and it means you do not have the money to buy other inventory that your store has an immediate need for.
The third method for increasing profits is by reviewing your margins. This exercise begins by looking at the maintained margin of your store. Note that the maintained margin is not the same as the initial margin of your products. That variance represents where you have taken markdowns. If these markdowns are a result of the end of season clearance sales, you will see where you need to change the way you order.
Once you have looked at the overall margin, you can begin to drill down into each department of your store. You will definitely find a variance of numbers. This shows which departments are doing a better job of making your business profitable. These are departments that may warrant consideration for making larger as well as being relocated to a more prominent part of your sales floor.
Within each department, you should then begin an evaluation of each fineline or category. As an example, fishing tackle may be a department within your POS. The finelines may be the various types of lures. As you look at this report, question why certain finelines have higher margins than others. Not just because of the cost of the products, but could you extend the margins on some of the finelines?
Before you try to determine a logic for that variation in margin, consider taking the products with the lower margin and increasing the price. You will never know if you can get the increased margins until you try.
Only by looking at this information your POS can provide will you be able to find these opportunities for increased margins.
While these are some of the major opportunities for your POS to make money, there are many others. As an example, the POS can likely tell you of everything that has been sold for an amount different from the marked price. This could tell you where employees are selling items to their friends at a lower price.
With a POS that is tracking your inventory, as you perform inventory counts of your store, you will find which products are being shoplifted.
Your point of sale system should not be an expense for your business. Instead, it should be a source of making money for your business. The POS is a tool. Just like fishing with the right lure to maximize the experience, the POS can maximize the profitability.