A short visit to any retail setting will instantly undermine the huge cost required to set up such a retail business. Retail business require massive capital and operational expenditure including maintenance of large inventory, rent for retail space, and human resource costs. For all such substantial investments retailers usually gain a painfully low margin on products. However, many such retail businesses are still in existence for many decades. The most crucial aspect to sustain themselves in the retail business is cutting down on the cost to improve the profit margin and make more money for the company. Although, cost savings for retail business can get very challenging, there are a few strategies which can save you money.
Merchandising and showcasing the items to the customer takes up a lot of retail space. Rent being the most significant expense in the retail business, can be cut down by using virtual showrooms. One of the most notable examples of the effectiveness of virtual showrooms can be showcased by the fact that Amazon has replaced most of their physical shopping stores with virtual ones. Customers can quickly browse all angles of the product and even view product demos. Another technology that can assist in maintaining virtual showrooms is AR and VR, which can be used to demo products without having to stock them up.
Retailers are getting smart on how they effectively manage their retail space. It’s now a common practice in the retail business that retailers call in vendors to share their retail space in exchange for some fee. Retail space can be lent out to conduct some event, engagement program, position new brands, or create brand decorations. Such a setting not only helps ease the rent cost but also helps expand the business.
Outsourcing sales force
In a retail business, the sales force also accounts for a significant portion of the cost base. Getting too many sales personnel and staffs on the payroll can eat into your profit margin as the basic salary, commission, incentives, and benefits need to be paid. Outsourcing the sales force can be a good idea to shave off some of the cost from the company books. Outsourcing also gives retailers the flexibility to scale sales base as per requirement. This way company can easily increase sales bases in peak times such as holiday season.
Smart equipment purchases
Retailers spend a lot on inventories, and after that equipment. Sometimes it is the equipment that is unnecessary or becomes obsolete too soon. Today, thanks to advances in digital technology, owning digital tools can significantly cut down on equipment expenses. For instance, providing modified tablets to sales associates can help eliminate the need for multiple devices. Also, even when technology changes, the same tablet can function with small software updates. It is always advisable to replace equipment that performs a singular task with more versatile tools that are able to perform various functions.
Automation of inventory management
The increase in freight costs has resulted in a surge in distribution and inventory management costs. Legacy inventory management systems are highly ineffective and do not optimize material handling and logistics flow. Companies in the retail business are opting for cloud technologies that can automate communication and logistics management to cut their cost base. Additionally, automation also frees up time for employees to contribute to the retail business in more impactful ways.