"Using Your POS Software to Identify Product Lines and Categories that are Killing Your Profits"
- By Bob Twain
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
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
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
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
This results in less work for you and more money in your
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
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:
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