Chapter 7: Margin Management

Knowing is not enough; we must apply. Willing is not enough; we must do.
Johann Goethe (1749-1832)

Margin management is not just something. It is everything. When we think of your business as that vehicle to get you where you want to go, we think of margins as the fuel of your business. Let’s tweak your margins a little bit intelligently to put a little bit more money to the bottom line. When I say to do it intelligently, I’ll define it specifically for you. I would never, ever price an item to slow down the sales. Never. I want to increase sales just like you do. And I would never price an item to rip off a customer, I would never do that. I would never do anything that would hurt my business, but I want to be smart about my business. I want to understand where I can go into my mix of products to maintain my Back Door Margin at where I need to be to achieve my objectives.

There are three ways to look at every item in your store as it relates to managing your margins. The first way we look at it is called item segmentation. Item segmentation is taking every single item in your database and plugging it into one of four buckets: Sensitive, Competitive, Blind, Noncompetitive/Non-Comparable.

With items you classify as Sensitive, you need to make a decision: Do you want to be the market leader on price and can you be the market leader on price? If you can’t, you must be very close to the market price. Your price should be not more than 5% to 10% above the competition’s or market leader’s.

With Competitive items, do you want to be the market leader on price and can you be the market leader on price? If you can not be the market leader, your price should not be more than 10% to 15% above the competition’s or market leader’s.

How can you tell if an item is to go into the Sensitive or Competitive bucket? Here are the signs:

Project starter. In my business, it’s gallons of exterior paint or interior paint. I’ll drop our margins slightly on our gallons of paint, and then we sell all the sundries, and that’s where we’re making our money. PVC pipe also goes into my Sensitive or Competitive bucket. PVC pipe, conduit, copper, galvanized. We must be close with the competition on pipe. If we’re not, we’re going to lose the entire project sale. So we’re going to be right where we need to be on pipe, couplings, and elbows Think what happens if Home Depot is at $1.59 on a 10’ stick of PVC pipe, and we take ours to $1.59. Hey, you know what Depot will do. They’ll be at $1.49. And do you know what happens if we go down to $1.49? Sure you do. They’re going down to $1.39. They can afford to take it down to nothing. We’re operating small to midsize retail businesses. We can’t afford to take our prices down to nothing, so we have to be careful. If you can lead the market, fine, do it, but if not, just stay within 5% to 15% of the market leader on price.

Commodity. These are items you buy and sell by the truckload. For us, it’s topsoil, potting soil, bark, steer manure, wood pellets, firewood. We buy truckloads, we sell truckloads. Our margins track down a little bit, and one of the reasons they track down a little bit is those are also items that we are advertising.

Consumables. The customers buy it, go home and use it, then buy it again.

Advertised. I would not put an item in our ad that Home Depot or Lowe’s carried unless we can meet or beat their price. I’ll try hard to differentiate in ways other than price whenever possible, but we’re not going to put an item out there that is purposely above what they’re selling it for.

Usually bought in multiples. For us, a good example is cabinet hardware. When a customer is going to buy 10, 20, or 30 of the item at the same time, they are looking closely at price. Now whenever possible, I don’t carry the same brand as Home Depot or Lowe’s carries, and then I don’t need to be so competitive on price. But I still am careful on cabinet latches and the cheap silver polish door pulls.

Items powered by electricity, batteries, propane, gasoline or rechargeable batteries. Our margins on these type of items will usually track down.

So that covers the Sensitive and the Competitive buckets. Neither of those yields high margins for us. When it comes to Blind, we have significantly higher margins. Blind items are those SKUs for which few of your customers know the competitors’ prices for the items. Non-Comparables are those for which, as far as your customer knows, you are the only one who carries the item, class, or department. Niches, an example of these, provide big opportunities to turn a profit. Why do many hardware stores carry Stihl power equipment in their store? One big reason is that our customers don’t find Stihl product in a Home Depot or Lowe’s.

With the 28,000 SKUs in my store, we’ll be smart in identifying for which of the items customers know competitors’ prices and for which they don’t have any idea. Ace Hardware’s category management department does a great job in helping with this knowledge. In many cases, the value to the customer of a Blind or Non-Comparable item is set by what the item can do for the customer, not by what the competition might be charging.

Doing the assignment to buckets takes time and experience. For instance, I put most exterior paint gallons into the Sensitive or Competitive bucket, but quarts of exterior paint go into the Blind bucket. To give you an idea of the margin tweaking opportunities in item segmentation, consider the Ace warehouse. My store carries 28,000 SKUs, but there are about 76,000 SKUs that can be ordered from the warehouse. Out of those 76,000, only 500 of them, a fraction of 1% should be considered as Sensitive, about 11,000, or about 15%, are classified as Competitive, and the other 65,000 SKUs, just under 85%, are Blind or Non-Comparable.

Item segmentation, then, is the first of three approaches to margin management. The second approach is called retail price point or retail price threshold. I’ll use my store’s experience again as an example, and then you should apply what I’m saying to your store’s situation. The average single item sale in my store is under $5.00. This is a very important number to understand in your business because that’s where you can focus energies to be able to make a little bit more money in your business.

As the retail price of an item tracks down, say down below $5.00 in my store, it is far more important to be in stock than what the price is, within reason. As the retail price tracks up, pricing becomes more of an issue to the customer. For me, $5.00 is an important price threshold. As the retail price tracks down below $5.00, I am far more concerned about my margins than I am about gross profit dollars. Now, you don’t need to be a CPA to realize you can not take margin to the bank. You take profit dollars if you sell the item. But I sell thousands and thousands of those lower-priced items. Over time, I sell hundreds of thousands of those lower-priced items. About 70% of the items I order for my store sell for retail at less than $10. We start to look at that and we formulate strategies based on where in our assortment of products we can go to make the money that we need in order to meet our objective for Final Gross Margin.

As the retail price tracks up, let’s say over $10.00, I’m more concerned about gross profit dollars than about margin. This is because I don’t want to lose the business. I don’t want to be out there on a Black & Decker hedge trimmer for $129 when Home Depot is at $99, and the cost to me is $90. I’ll be close to Home Depot. I want those gross profit dollars. I’m not going to give away the sale of those types of items, but in our business, it is very important for us to be smart about the margins on lower priced items.

All this leads me to a question for you to answer: In your assortment of products that you carry in your business, looking at price thresholds, price points, or even taking into consideration item segmentation with Blind, Non-Comparable, Sensitive, and Competitive, where are your gross profit dollars coming from that are driving your success? Are they lower priced items, are they higher priced items? Notice that my question is not about where your sales come from. I want you to think about where your gross profit dollars come from.

In my business, almost 65% of our gross profit dollars come from Blind and Non-Comparable items that retail for no more than $10.00. Almost 40% of our gross profit dollars are on items below $5.00. So where do we go to look for opportunities to tweak our margins a little bit? We dip down into that lower price because we’ll mess around with the prices a little bit more below $5 or below $10. Once we start getting up too high, we’re much more sensitive to where the market is.

At the other extreme, less than 3% of our gross profit dollars are from items that are classified as Sensitive. We don’t make much money on them. It’s not that I don’t care about them. Having those items drives traffic into the store, so I want to be right on with pipe, I want to be right on with kerosene. I want that customer shopping in our store, and I’ll give away some margin on some of those, but I’m going to make it up somewhere else.

The third approach to margin management is item velocity, which means how quickly or slowly individual products in your store are selling. For this, I bring out another set of buckets, labeled “A” through “D,” with “A” being for the fastest selling items, those with the highest inventory turnover, and “D” being for items with the slowest turnover. Oh, yeah, I do have two more buckets for sorting by item velocity. The “X” bucket is for items that have not sold one unit during the past year, just sitting there on your shelf. The “XX” bucket for the items that have not sold even one unit for at least two years. “XXX” was already taken for use by certain movie producers, so I won’t even look inside that bucket for now.

The “X” and “XX” items don’t just fail to make you money. They are a downright cost for you, and that gets directly in the way of the profitability we’re wanting to build for you. Please most definitely do not say, “Well, I paid $1.00 for it, and I’m not going to sell it unless I get at least $1.00.” That does not make any sense. You take it down to half of what you paid for it, you turn it into cash you can reinvest in merchandise that will make you money. Once you sell the new item one time, you will nearly make up the difference in lost profit. When you sell it twice, you are already money ahead.

I want to be real clear about this. If you call me up on the phone someday complaining about your cash flow, and you start singing to me that country and western tune, “I Don’t Know Where My Money Went,” you can expect that I’ll sing right back to you my special song called, “Let’s Look at Your Obsolete Inventory, Slim.” Just like Johnny Cash, I’d be singing about walk the line, but I change the lyrics to make it, “Walk Every Aisle.” If I came to consult with you, we’d print a report off if your computer could, and all we’d do is query the system to tell us everything that hasn’t sold in the last year. Then we’d go out on the floor and look at it. If you’ve got inventory numbers in your system, we’re going to look at quantities, and we’re going to set in place a plan to turn that obsolete inventory into cash so we can reinvest it in the business and make more money.

I know how some retailers think. They say, “I’m not going to sell it below cost. I’m going to sit on it for the next fifty years, and maybe someday somebody might buy it.” Well, yes, I agree that somebody might come into your store someday, but by the time they do, chances are you will have lost more money on it than you’re going to gain. You will have lost all of your money on that product. There is a cost to carry inventory. Depending on who you talk to, it is anywhere from 1% to 3%. If you have to borrow money to replenish inventory, can you imagine how expensive it is then to keep dead inventory?

I would suggest to you that you tweak margins up on the C and D sellers, but never on the X or XX non-sellers. I’m not talking about putting high margins on items to slow down the sale. Don’t hear that. I’m just saying that if you have items on your shelf, and they’re selling only a few times per year or less but you must them in your store, look at your margins on those items. If you’ve set a Final Gross Margin overall of 44%, you had better be carrying at least a 50 point margin on those slower selling items. Most definitely, I am not suggesting you or other retailers take arbitrary markups just to improve your gross margin. Be smart about it. Otherwise, do you know what will happen? Some retailers will just go nuts with it, and it can put you out of business. Remember, setting and achieving a gross margin is one of the top priorities a store owner has. There are two key words here in this success formula: “Setting” and “achieving.” Without both, you will lose.

Let me come at this from a different angle: Remember how I said that success depends on you distinguishing yourself by being the biggest, the least expensive, the most distinctive in merchandise assortment, the best at customer service, or best of all, a mix of those? Well, being a small to midsize business, you have to include the “best at customer service,” and only retailers in that category who execute legendary customer service deserve to maximize their profitability. You must earn the right to maximize your profitability, and the way you earn your right is by servicing the customer beyond anybody else in the industry. I’d already told you about what happen to be three of the top five tactics for retail pricing. Those three are using item segmentation, item price thresholds, and item velocity. But the one that happens to be right at the top of the top five is outstanding customer service. And please let me repeat myself here: In a service industry, only retailers who execute legendary customer service day in and day out deserve the benefits of maximizing their profitability. You have to earn the right to charge higher prices than the market leader.

Wait, there’s that fifth one I haven’t told you about yet. It is using a rounding tactic. In fact, if the item segmentation, item price thresholds, and item velocity sound a little overwhelming to start, you should begin with a rounding tactic. Once that’s in place, you can tackle the others. And whenever you do use the other three, finish it off with a rounding tactic.

So what’s a rounding tactic? Well, let me answer your question with a question: If a customer sees an item priced at $4.99, which number in that price does a customer use to make their buying decision?

The correct answer: The $4. A customer will make a buying decision on the number to the left of the decimal. They own that number. As the retailers, you and I own the numbers to the right of the decimal, whether its $.29, $.49, $.79, $.95, $.99, or whatever. So since we own those numbers, whenever possible let’s always make them $.99 instead of $.95. We’re not talking chump change here. We’re not talking a thousand dollars, we’re not talking two thousand dollars, we’re talking about thousands and thousands and thousands of dollars, and we’re talking about it because we’re very fortunate. We have thousands of items, we run thousands of transactions. Do the math. When I’ve done the math with store owners, the store owner will discover an aggressive rounding scheme can be worth 2 to 4 margin points for nothing more than price rounding. Be sure to round everything in your store. Not just your core departments, but also your niches. Use a well thought out rounding tactic on every item in your store.

The retailer owns the number to the right of the decimal. It contributes to the profit in my business. But since the customer owns the number to the left of the decimal, the $4 in my example, I’m going to be very cautious in how I change that number. This ties in with my attention to pricing thresholds. Remember that I want to maximize the profitability, but do it without slowing down the sale.

Here’s the rounding tactic that works for me. On items below $1, we use a lot of different price points. But once we get above $1, from $1.00 to $2.00, we’ll use $1.29, $1.49, $1.79, or $1.99. We do not use $1.29 or $1.79 very often. You know why? We’ve learned over the years that it does not matter. Okay, I know there are exceptions to this, but we handle the exceptions and move on. What is mostly true is that there is not a customer around who would pay $1.79 for the product, but would not pay $1.99. I’d rather have that $.20 in my cash register than in the customer’s pocket, so I’ll charge $1.99.

I am not telling you to be ridiculous about this. If you need to be at $1.49 on a Sensitive or Competitive item, that’s where you should be. But if you tell me you could sell as many at $1.99, then all I’d do is look you right directly in the eye and go, “Then, why aren’t you at $1.99? Couldn’t you use the money?” Hey, I’ll back right off if you say that you have half a million dollars sitting in your yard right now, investments overseas, and a Brink’s truck coming past your store five times a day to pick up all the money you’re making. But otherwise, I’m going to be asking you why in heck you want to leave all those thousands and thousands and thousands of pennies and dimes in the customers’ pockets instead of in your cash registers. Watch the pennies closely and the dollars will follow.

When you start working on retail pricing in your store, begin by looking at your sales by department and then by product class. Focus on the departments and then classes where most of your sales are coming from. The lesson here is for you to keep very close track of every single class in the store. Within each product class, set up pricing tactics or pricing strategies for your items that are Sensitive, Competitive, Blind, and Non-Comparable. Set up the tactics or strategies for lower-priced items, let’s say items that have a cost below $10.00. And if nothing else, use a rounding tactic.

Look again at how it works. Between $2 and $3, we have just $2.49 and $2.99. That’s it. No $2.79? Nope. No $2.60? That’s right. Why? Well, by now, you know why.

Couldn’t you use the added money? Don’t you need the money? It takes a tremendous amount of money to be a great retailer. It is not cheap. If you want to grow the business, and, hey, you need to grow your business, it takes that much more money. And you know what? The customers want you to be successful. They want your store to be there, convenient to them. They want to be able to shop with you. They want you to grow.

Going back to the rounding tactic, you won’t find many items at all in our store at $4.49. That’s because $5 is a critical pricing threshold for the customer’s mind, so we’ll take the price right up to that level, but not to $5. When I jump from $4.99, I’m going to $5.99. What’s the difference in price to a customer on an item marked $5.19 instead of $4.99? It is one dollar. You say, “Wait, it’s only 20¢, not $1.00.” No, it is $1. Customers use the number to the left of the decimal to make their buying decisions.

In a million years, I would not price an item at $5.09, $5.10, or $5.15 unless I was Wal-Mart, where I’m making my strongest case on price. But my store is distinctive on customer service and merchandise assortment. If I saw a bin tag in my store that read $5.09, $5.10, or $5.15, I would faint. Right there in the aisle, I would faint dead away. My wife, Geni, who operates the store, would have to call Jim, the assistant manager, who we call Big Jim, to carry me out through the back door and toss me in the Dumpster so the customers aren’t tripping over me. Geni is real good about avoiding safety hazards in our store.

Yes, $5.00 is a critical threshold. We’ll play with the prices between $2 and $5, we’ll play with them a little bit, but when we jump $5, I’ll tell you, we’re very, very careful. When we jump $10, we’re going to $11.99. What about $10.99? Two reasons you don’t go to $10.99. First off, it’s a tax form number in the United States , and nobody likes the U.S. Internal Revenue Service. Second, I would tell you there is not a customer in the world who will give you $10.99 and won’t give you $11.99. Now they might not give you $11.99 because in their mind it was a $9.99 item, but if they’ll pay $10.99, they’ll pay $11.99.

Okay, there are exceptions. There are a few customers who would pay $10.99, but not $11.99. But remember, I don’t operate my business on exceptions. I operate on what is true most of the time. Also, $10.99 could work if Scott’s Summerizer was at Home Depot for $10.99. There’s a good chance that I’d meet them on that price, but again, it would be the exception, not the rule. And I make an exception for sequencing. If I have the 6 oz. size at $1.99 and the 12 oz. size at $2.99, and I see there’s a demand for a 9 oz. size, I might bring it into the store and price it at $2.79 so the pricing makes sense to the customer.

When we jump $15, we’re going to $16.99. I don’t stop at $13.99 because lots of people consider 13 to be an unlucky number, and customers own the number to the left of the decimal. I don’t stop at $15.99 because I challenge you to show me the customer who will give me $15.99, but not $16.99. They’re just not out there.

We don’t use $109.99. We go $119.99, $129.99, $149.99, $179.99, $199.99. Once we get over $200, we’re going $229.99, $249.99, $279.99, $299.99. From $300 to $700 we are only at $49.99 and $99.99. Once we get over $700, we’re rolling a hundred dollars at a time.

Before you disagree, think for a second here. Think this through carefully. A well thought out and executed rounding scheme is worth thousands and thousands of profit dollars to a retailer. This is serious money and can be the difference between success and failure. Our financial model will not allow us to be competitive on every item we sell. Outstanding service comes with a price.

What if customers ask you why your prices are higher than at the competition? Well, first of all, realize the customers expect prices at the high-convenience, world-class-service, small to midsize retail business to be higher than at the Big Boxes. Even when we’re priced below the Big Boxes, we get no credit for this. They will think our prices are significantly higher than at a Big Box. So I say, why disappoint them?

But answering questions about pricing is another place where scripting for the floor staff and cashiers is helpful. Here’s what I suggest as an answer. “Thank you for your input. I’ll let my manager know what you’ve said. I think you’ll find that our prices are fair and at where we need to be to offer the services for our community.”

The problem you have here is when you do not execute on what the customers’ expectations are. They will pay a higher price if there is value attached to it. If your customers are complaining about your higher prices, maybe what they are saying is, “I would pay a higher price in your store, but I do not see a benefit to do this, so I may as well shop at a Big Box.”

I think you see that margin management and the other parts of setting retail prices require a constant focused effort. I wouldn’t want to make margin management sound easier than it is. Margin management is a journey, not a destination. In my store, I have an employee who serves as our Retail Pricing Specialist. His job responsibilities are completely devoted to managing the retail price changes in the store. His name is Bob, and unlike what I’ve done with almost all the other names in this book, I’m so proud of Bob that I’m using his real name. As I’ve said a few times already, I’d never tell you that what I do in my business or what somebody else does in their business is always the very best way for you to do business. In describing Bob and what Bob does, I want to share an idea that might work very well for you, or you might adapt it in some way to work even better for you than it has for me.

Bob puts up the bin tags with the new prices on them. Bob is authorized to recruit help if he’s got a very large price change, but by and large, it is Bob who puts up the bin tags, and it is always Bob who takes responsibility for the bin tags being perfect. Bob knows about product locations in the store. And to pull it all together, Bob overflows with high-quality common sense.

Once each year, Bob does category reviews and pricing reviews on all of our critical classes of merchandise. He shops the local competition as necessary, and he makes sure the retail price changes will make sense to the customer. That is truly important. For instance, think about what we call “runs and relationships.” Think about drill bits. The customer expects to the price to go up as the size of the drill bit goes up. They’ll think it’s a mistake if the prices go up and down as they look at the same brand of drill bit with increasing sizes. That could give us a poor pricing image. So when Bob puts up the bin tags, he just sort of steps back and looks them over. Does it always go 1, 2, 3 for the same price, go up, do 1, 2, 3, go up, 1, 2, 3, go up?

A really big benefit in having somebody do retail pricing in our stores comes when there’s a pile of bin tags out on the sales floor. Employees who prefer to be doing lots of other things than put up bin tags end up putting up those tags as fast as they can so they can get that sheet clear and just throw it away. In doing it that way, they are missing one very important element: Once those bin tags are up, they forget to stand back, look, and spot the places where you have to say, “That would not make sense to the customer.” You’d be impressed by how many thousands and thousands and thousands of dollars we’ve made in our company just by having Bob stand back to look at the relationships among the item prices.

Sometimes Bob will monitor sales on our “A” items, our best-sellers. If we take a price increase, I get nervous, and I ask Bob to monitor those for a few months. I never ask him to manage more than 100 price changes at a time, and I have him monitor those just to make sure that if we take a price increase, our sales don’t go down. I don’t want to let that happen.

Bob has great initiative. He looks for and finds margin opportunities. He understands the need for profit and is motivated to have our store succeed. He’s detail-oriented, excellent at follow through, computer literate, and able and willing to learn. Those are strengths for you to look for if you decide to hire a Retail Pricing Specialist.

Every hour they work, they’re making money. Bob is not a cost to our business. He’s an investment. Yes, we do pay him, but I would argue that, by definition, it is an investment to your business, even though you put out money, when you make much more money than you put out. Their efforts are multiplied every single day, day after day, year after year. Bob’s been doing retail pricing for us since 1995, the year after I caught the margin management fever. Oh, yes, one more thing: Do not even think about coming into my store and trying to steal Bob. Find or develop your own Bob.

Bob is so important to our store that if the business ever got really, really bad, and there were only two people left in our store, it would be Bob and me. I also set a special set of standards for Bob. You know by now how important standards are to me. I expect employees to show up on time and put in the hours they agreed to work. But I don’t tell Bob, “You’ll work Monday, Tuesday, Wednesday.” I don’t say to Bob, “You’re going to work 24 hours this week.” There are price changes Bob gets on Monday that have to be done on Friday. I don’t care when he does them. It doesn’t matter to me when he does them as long as they get done. I can accept that arrangement because I know Bob carries lots of initiative and he’s well organized.

In addition to a Retail Pricing Specialist, I suggest you have software to help with the margin management process. An excellent example of this category of software, and the one that I use in our business, is Margin Master. Here are the sorts of features I recommend you look for in technology for margin management, based on what I’ve said so far and what you’ll read me saying in later chapters:

The ability to easily input basic product information, such as department, class, product group, item code, item description, vendor data, cost, retail price, and monthly sales amounts.

The ability to easily drill down from the product class level towards the item level in order to determine where in your assortment of products you can go to achieve the best Bottom-Line Profit.

Allows easy identification of items that carry a margin or a sales velocity that is lower than what you consider to be acceptable.

Sets rules for rounding off prices in ways that maximize your profitability on every item sold without losing sales.

Allows numerous “what-if” scenarios without committing to actually making the changes.

Quickly calculates the annual and month-by-month dollar and sales percentage impacts of “what-if” changes in pricing.

Quickly calculates results by store, department, supplier, or other ways you categorize your inventory.

Saves retail pricing strategies so that you can call them up later without needing to recreate the strategy each time your product mix changes.

Smoothly interfaces with a way to produce bin tags containing the new prices.

Allows you to see at a glance where the gross profit dollars in your company are coming from as it relates to item segmentation, item price thresholds, and item velocity.

Is backed by a company that has support staff who are available, willing, friendly and knowledgeable with experience in your type of business.

Your retail pricing software needs to save you time, give you 100% accuracy, and make you more money. When I use Margin Master, it has my sales history from last year, so it predicts the future based on my last year’s history. I hit the Apply button, and within seconds, it tells me how much more money I’m going to put to the bottom line if I make this change, whatever the change is. This is a powerful tool to help manage the retail pricing process.

In 1994, I was close to going out of business, really close to going out of business. I was struggling big time. Then I started to get this whole margin management thing, and man, one day I woke up, and that old light just clicked on, and I haven’t stopped smiling since because once you get it, you know margin management is a process. I selected Bob to manage the retail pricing because I quickly discovered you don’t ever finish creating the profit-making potentials from margin management. Once you start on it and get involved with it, it’s not something you start today and finish. You never, ever, ever stop working on it. Sometimes it is a slow, tedious process. But at the end of the day, it’s excellent for your profitability, and that’s more than enough to keep me going with it. The more time I spend working on retail pricing, the more money I make.

I don’t fully understand why there are retailers who do not want to take the margin management steps to make more money. There are retailers who won’t do anything more than double the supplier’s cost of the item to set the price at retail. Are you among them? If so, I would tell you cost is only a guide, that’s all. What is most important to you is what the market will bear, which means recognizing what value the customer sees in the item, the service that goes along with the item, the convenience you offer to the customer, and all the rest. What you pay the supplier for the item goes into it, and we look at that with the Back Door Margin. But do not be afraid to mark something up to more than double the cost if that is what customers will pay because that’s the value they set on having the item.

Take your thinking back to being a professional instead of an amateur. I have retailers telling me it is not their job to set prices, it’s the supplier’s job. I have retailers who say they don’t want to take on margin management because they don’t have the time or the right people to do it for them. I say, do not allow somebody else to impact your success to that degree. I say to those retailers, “Whose job is it to prevent you from going out of business?” I know the government might subsidize the airlines, bail out the banks, and keep the auto industry alive. But do you think that if you or I have big financial problems in our businesses, the government is going to rescue us? No way. At least, I’m sure not counting on it. They’re going to want the dime I wasn’t able to pay them last year, and they’re going to want twice as much in interest on it this year. So take personal accountability .Monitor your Dashboard Indicators. Use the information your systems give you that empower you to make the best decisions for your business.

Golden Nuggets for Now

  • Formulate strategies based on where in your assortment of products you can go to make the money that you need in order to meet your objective for Final Gross Margin.
  • Be sure that you consistently go beyond setting a gross margin to truly achieving that gross margin.
  • Earn the right to charge higher prices than the market leader. In a service industry, only retailers who execute legendary customer service day in and day out deserve the benefits of maximizing their profitability.
  • Use a well thought out rounding tactic on EVERY item in your store, not just your core departments, but also your niches.
  • Do not be afraid to markdown an item below cost, if that is what it will take to clear it out
  • Watch the pennies closely and the dollars will follow.
  • Have a Retail Pricing Specialist in your store.
  • Get and then use retail pricing software that will save you time and make you more money.

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