Many small retail businesses are working on tight margins and face intense competition. While increasing traffic – both in-store and online - and growing the customer base is always beneficial, keeping costs at a minimum also supports the bottom line. Before you throw your hands up in frustration about high costs, consider a few ways your retail business can lower them.
When some retail business owners hear cost cutting, they immediately think of product quality and grow concerned. That’s a great reaction since reducing the quality of product is the top of a slippery slope since it can lead to dissatisfied customers, negatively impacting your reputation and sales. Let’s instead look at opportunities to cut operational costs.
The first step to cost cutting is to remember the old saying: everything is negotiable. Nothing is set in stone. Have cost-reduction conversations with suppliers and service providers. Sometimes suppliers and providers, not wanting you to even shop elsewhere for similar products and services, will instantly react with a price discount.
Bob Phibbs of The Retail Doctor suggests renegotiating with vendors annually as they “may have other plans that would save you money.” On his list of those to check in with annually are advertising, internet/telephone/cell phone providers, janitorial services, shipping companies, and health care plans for your employees.
Phibbs encourages retailers to remember, “You’re also a customer too. Companies will likely do anything they can to retain their relationship with you.”
Even if the answer is no, the conversation may lead to a greater understanding of what services and supplies can be cut. Thinking creatively and outside the box is sure to lead to positive results.
Green + Green
As people grow more concerned about the environment, they are behaving in ways that display the concern. “…Americans are expecting companies to be engaged in the process of making an impact when it comes to social and environmental matters,” says Adam Butler in a Forbes post.
Going green not only engenders positive feelings but can be a cost cutting measure.
Ever go into a store that is freezing in the summer and hot in the winter? Retail business owners can save money and reduce power consumption by ensuring their facilities are temperature controlled. Consider locking thermostat covers to protect your energy dollars and automatic thermostats to adjust the temperature based on the time of day.
A second green measure is to utilize energy efficient light bulbs. Many retail stores already utilize fluorescent fixtures, but if your store has any incandescent fixtures consider replacing the bulbs with CFL or LED. According to data from TheSimpleDollar.com, upgrading bulbs can save as much as 84% on energy costs. And CFL and LED bulbs have longer lifespans, which can result in as much as 95% less material waste.
Another idea is to go paperless. Storing records in the cloud is environmentally friendly and saves money. It also allows valuable space to be used for potentially money-making products.
An energy audit can deliver other ways to go green and save on utility costs. The National Reusable Energy Foundation suggests “to ensure that you are getting the maximum bang for your buck, consult a qualified contractor or energy auditor to reveal the most cost-effective energy efficiency solutions that can lower your utility bill.”
Ever get a large package in the mail only to find a small item in it? It’s wasteful and expensive.
In a post on Shipify.com by Alexandra Sheehan, Jim Burns of Shorr Packaging explains, “shipping costs don’t come from just the weight, but the size of the package, too.” Sheehan reports that, “reducing box height by just six inches could save up to $6 in shipping per package.”
To shrink the box size, retailers need to consider eliminating any unnecessary materials that are sent along with the items ordered. For example, if items are not fragile, there’s no need to include Polyethylene bags.
If an item is small enough and durable, Sheehan suggests considering shipping bags. “These are smaller in size and weight than cardboard boxes and can also be cheaper and easier to store.”
And remember, shipping costs should be negotiated regularly.
Reducing box height by just six inches could save up to $6 in shipping per package
Credit Card Transaction Fees
As more people go cashless, credit card transaction fees are simply a cost of doing business. However, there are ways small retail business owners can get lower transaction fees.
A Business News Daily article offers up some helpful tips to reduce credit card transaction fees. The first tip is to negotiate. Merchants with larger volume of transactions are in more of a position to negotiate.
Another tip is to reduce the risk of credit card fraud since, “the higher security risk you pose as a merchant, the higher your credit card processing fees will be.” Fraud can be reduced by swiping rather than keying in a credit card. “Merchants can also lower the risk of fraud by providing security information that protects the cardholder and validates the purchase.”
Other tips include using an address verification service, properly setting up the credit card account and terminal, and consulting with a credit card processing agent who has insider information.
Outsourcing tasks associated with running a small retail business typically means bringing in an expert or professional, who is typically compensated accordingly. Consider, where possible, having store personnel who might be trained or experienced in handling those outsourced tasks.
Perhaps, someone on staff has basic accounting skills and can help keep the books. Or an employee might be able to handle website updates or graphic design. Be sure that employees who are doing this non-standard work are being compensated correctly and are covered by workers’ compensation for that type of work.
Diversifying employees’ tasks has benefits beyond cost cutting. When employees are engaged in tasks they enjoy and which offer the opportunity to grow their skills, they’ll feel increased job satisfaction which can lead to less turnover.
Keeping costs down is something small retail business owners should regularly keep in mind. Cost cutting does not have to mean reducing product quality or subtracting staff. Being mindful of costs can even improve your business and enable to you to keep more of your hard-earned money.
5 Ways Retailers Can Cut Costs
- Renegotiate with suppliers and service providers
- Go green to make green
- Reduce shipping costs through packaging and negotiation
- Reduce credit card transaction fees through operational and system improvements
- Insource certain tasks
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