shutterstock 287961836

The most worrisome issue facing businesses is expenses eating into profits, according to 22 percent of small business owners and CFOs being surveyed for PEX Card's December 2013 Benchmark Expense Survey. The average small business with less than 10 employees spent $363,000 a year in 2013 on expense costs, while the average small business with 10 or more workers spent $2.3 million. Non-sales employee compensation accounted for 26.1 percent of these expenses and salaries, sales incentives and commissions accounted for another 19.2 percent. Business equipment, health care insurance and rent also ranked high on the list of expenses. Retailers face additional concerns, such as the cost of inventory and shipping. Here are five ways you can trim some of these expenses to maximize your retail profits.

1. Outsource Your Sales Force

With employee compensation, salaries and sales incentives and commissions topping the list of typical business expenses, cutting these costs makes strategic sense. One way to reduce your costs in these areas is to outsource some of your sales force. Outsourced sales representatives can handle online sales all year and supplement your internal work force during peak shopping seasons, reducing the cost of hiring additional full-time staff, explains MarketSource.

2. Leverage Virtual Space

Renting and improving store space can be one of the biggest costs for retailers. One way retailers have been reducing this expense is by using virtual showrooms to reduce the amount of space and inventory needed. As Amazon has successfully demonstrated, virtual stores are a great way to reduce the need for physical shopping. Another method is using virtual displays in brick-and-mortar locations to reduce the amount of physical inventory that needs to be stored on-site. For instance, Audi uses virtual showrooms at select locations to enable customers to preview the company's entire car line hands-on without the need for a full lot of physical vehicles to be present.

3. Share Space

Another way to reduce rental costs is to share space with other vendors. Increasingly, digital vendors are seeking partnerships with brick-and-mortar vendors to get their products into physical stores where shoppers are in a buying mood. Just as Starbucks grew by partnering with chains such as Barnes & Noble to get into locations where buyers were already congregating, e-commerce stores are beginning to do the same thing, reports Retail News. For instance, Sears has managed to survive shrinking in-store inventory by renting out space to partners such as Work 'N Gear and Edwin Watts.

4. Avoid Unnecessary Equipment

Another way retailers can cut costs is to reduce expenditures on unnecessary equipment. Digital tools make it increasingly easy for vendors to use less equipment to get the job done. For instance, Nordstrom saw a 15 percent increase in sales after it equipped sales associates with modified iPod devices to process payments anywhere in the store. With mobile payments expected to increase in popularity in coming years, devices such as the iPad Mini can double as mobile cash registers, saving you equipment costs while letting you process checkouts faster. Retail Minded recommends replacing any equipment that can only perform one task with more versatile tools that perform several functions. It also suggests using pay-per-use online services to cut the up-front costs of paying for software.

5. Automate Your Inventory Management

Freight costs have risen 14 percent since 2013, driving up the costs of distribution and making inventory more expensive to manage, explains a Boston Consultancy Group and the Grocery Manufacturers Association study. The study reports that some retailers have been able to cut their net cost of goods as much as 30 percent by using cloud-based technologies to automate their communication and logistics and optimize inventory allocation. Using an alternate strategy, Austin consignment store owner Sharon Munroe has been able to cut her inventory costs to zero by splitting proceeds with her cosigners instead of pre-buying her inventory.


Roy Rasmussen, coauthor of Publishing for Publicity, is a freelance copywriter who helps small businesses get more customers and make more sales. His specialty is helping experts reach their target market with a focused sales message. His most recent projects include books on cloud computing, small business management, sales, business coaching, social media marketing, and career planning.



Contact Us

Retail Merchandiser Magazine

Cringleford Business Centre,
Intwood Road Cringleford,
Norwich, UK, NR6 4AU

  +44 (0) 1603 274 130

Click here for a full list of contacts.

Back To Top