What is Retail Software?
For years large retailers have used retail software programs to help manage their businesses and now, small retailers can utilize the same retail software to run their operations for more profitability.
1. Save money on inventory
Reducing inventory costs is vital for every retail business. Retail software programs can save on inventory costs through tighter controls and smart ordering. For example:
• Smart replenishment. A computer system can make it so much easier to re-order. This means that replenishment can be done in smaller quantities and more frequently, reducing stock holding and exposure to risk.
• Knowing the ups and downs. A computer system keeps tabs on all products sold and when they were sold, allowing the owner to identify trends easily and stock up or down accordingly.
2. Stocking products that customers want
Major chain stores divide their product portfolio into “departments” and “categories”. For example they may have a “Toys” department and a “Baby” category. They do this to monitor which products are over and under performing. This same analysis is available to independents through the use of retail software. Some experts suggest using no more than 10 departments and 10 categories within each department (giving a maximum of 100 categories). If more than 100 categories are used there can be too many insignificant categories representing less than as 1% of the business. Even large companies like Wal-Mart successfully manage their inventory by using a small number of categories.
3. Develop better marketing initiatives
Many marketing initiatives rely on sales, discounts, bundles and twofers (two for the price of one). Giving away profit is essential at times to move old stock or possibly to generate more traffic, but it is also very costly. For example, on a product marked up by 1.6, then put on sale at 20% discount, twice as many products need to be sold to maintain the level of profitability. So, it is important to track which marketing initiatives work. Repeating ineffective promotions loses money. Big stores closely track the performance of their marketing activity by looking at; a) the rate of take-up for sale items, b) changes in the number of customer purchases and c) average customer spend during the promotion. Independents can do the same with a retail software system. The result will be more successful marketing campaigns and less wasted money on unproductive discounts.
4. Increase margins by negotiating better deals with suppliers
Reducing the cost of a product can increase profit margins in one of two ways; a) maintain the price of the item and deliver more profit from reduced costs, or b) use the reduced costs to lower prices and increase demand. The way retail software is used to achieve lower costs is through “evidence based supplier negotiations”. For example, a supplier’s products may be underperforming in a category or may be less profitable compared to others. Using a retail software system to give precise evidence provides excellent negotiation material.
In summary, independent store owners will find that sophisticated and easy to use retail software programs are more affordable than ever and offer many of the capabilities and benefits that have helped larger stores maintain their competitive edge.