Feature
Using POS to Identify Product Lines
That Are Killing Your Profits
By Jeff Haefner
One of the best ways to increase profits in your retail business is to analyze the profitability of your product lines (manufacturers) and categories using actual sales statistics.
I can almost guarantee that every retailer has at least a couple product lines and categories that are killing their profits. By simply switching or dropping a couple of products that are not pulling their weight, you can easily increase your profits by 2% or more.
If you do 1 million in annual sales and increase profit margins by 2% - that's an additional $20,000 in your pocket each year!
As an example, let's say you open your POS software and pull up a report that compares your profit margins for each of your categories.
If you sell sporting goods, you might see your "exercise equipment" category has a really low profit margin compared to everything else. This raises a question... should you be really carrying this category? If you replaced it with something that had a higher profit margin, would you get a big boost in profits?
You can do the same type of thing with your product lines. Let's say you sell lawn mowers and you built up a lot of product lines over the years. So you pull up a sales report to compare the profit margin for each line. When you look at the report, you might see that your Lawn Boy and Murray product lines have a really low profit margin compared to the rest.
What if you dropped those product lines? There's a good chance you'd have less headaches trying to order and manage inventory from all those sources -- and you'll probably end up selling another brand of lawn mower that has a higher profit margin.
This results in less work for you and more money in your bank account.
If you take a look at your profit margins, I'm sure you'll be amazed at what you see. Some of the product lines that you thought were making you a bunch of money could be killing your profits
What I really love about this technique is that it's based on actual numbers - not theory or guessing. And it works for all types of retail businesses.
And the nice thing about using your POS software to view profit margins is that you will save time, reduce calculation mistakes, and you can easily slice and dice the information to get to the bottom of what's really going on. Now I'm NOT telling you to drop ALL your categories with the lowest profit margins. However, I'm very strongly urging you to take a close look at those items and decide what's best for your business.
You should never assume anything.
If you don't know your profit margins and you're operating blind, start getting that information now! Running a business without this information is a sure fire way to go bankrupt.
Now keep in mind that not every POS system will give you the exact reports that you want. So if you're looking for a new POS system, you need to write down ALL the features that are important to you and create a "wish list". So when you choose a POS system, you can make sure it has the important features that will really boost your profits.
In fact, creating a good features wish list (or checklist) is absolutely critical to make a good decision when choosing your POS software. If you need help creating a good check list, check out this tool that's included with The POS Software Buyers Guide: http://www.possoftwareguide.com/pos-comparison-chart2.html
