In a time of economic downturn, most businesses will be looking for ideas on how to cut costs and maximise their profits wherever possible. In the retail sector, there have been limited opportunities for small businesses to function, and therefore make enough sales revenue to stay afloat. Here are the top ways in which retail outlets can keep costs down.
Cost Cut with Caution
Cutting costs is a great way to increase the profit margin for a business; however, not all cutting of costs will result in a happy ending. According to a recent study, the costliest in-store operating expenses are labour, rent, marketing and energy so these are great places to start when looking to cut costs. Nevertheless, taking cost cutting in these areas to extreme levels could start to damage your reputation and future business success. For example, cutting on labour costs could include making some team members redundant or taking away paid overtime, which might have a negative impact on the company’s image and may result in losing even more staff than intended.
Another business might choose to use cheaper ingredients or components for their product, sacrificing on quality. Both scenarios would affect the customer’s experience and will have them queuing up at your competitor’s door, making the cost cutting approach out to be a massive failure. Cut costs with caution by trying not to sacrifice on the quality of your product or service. This is a more strategic way and long-term way of thinking and will allow you to keep the customers that you already have, loyal, which won’t cost anything but will do wonders for your reputation and brand image.
Customer Retention is Key
Expanding on the previous point, keeping loyal customers coming back for more of your business is a crucial cost saving technique. Attracting new customers is often difficult and expensive and so having strategies in place to retain your existing ones will save you from unnecessary expenses. Ways to do this include using their data to your advantage and personalising the adverts that they see, or giving them something back for being a loyal customer by surprising them with offers and discounts. Loyalty cards and schemes are also a great way to keep your customers coming back for more since they will recognise that their loyalty to you would lead to rewards that wouldn’t be available if they decided to go to another competitor.
Cut Marketing Costs
Hopefully, after retaining your loyal customers, you won’t need to put a lot of money into the marketing budget to help attract newer ones, plus your existing customers might help spread the word of your business through word-of-mouth marketing, which is completely free and organic. Don’t forget that your employees are another great asset for marketing that you already pay for, so ensure that they are trained extensively and understand the core company values to pass them on enthusiastically to customers.
Lower Your Rent Costs
It may be possible to re-negotiate your lease with the landlord to save costs on rent. You can do this mid-contract by stressing the health of your business and showing them any proof that they might request and making them aware that you have a long-term plan to stick around and continue to be successful. If you are at the end of your lease and looking to extend the contract, after showing the landlord that you are a good tenant, you can ask them what they are prepared to do to keep you, because in this situation, you are the customer.
If you have negotiated all you can, the next thing to consider if you are a business with multiple outlets, is to close the underperforming stores and keep the stronger locations open. This will allow you to focus more of your attention on the stores that experience the highest success and save on huge costs associated with the rent of underperforming premises.
Save On Energy
Energy is another area where major costs are incurred, with a 20% reduction representing the same profit savings as a 5% increase in sales. Therefore, it makes sense to cut costs wherever possible in this area and there are a few things that you could do, starting from smaller steps to slightly bigger ones. First of all, check that you are with the most cost-effective energy company and that you are on the best rate for your business. Changing energy provider could turn out to be one of the most beneficial cost-saving activities that you try and could be as easy as visiting an online comparison website.
Next, make sure that all of your appliances are up to date and as efficient as possible such as replacing old, out-dated lighting with newer, energy-saving bulbs and fittings. This will enable you to have the same amount of light although with a fraction of the energy usage that a standard bulb may use. Although this might seem costly at first, the energy savings over time will add up and help to reduce the cost of your energy bill.
As any homeowner knows, minor issues with your boiler, such as gurgling, banging or whistling noises are a sign that it is coming to the end of its life. If you recognise that its time for a new boiler then you would visit Boiler Central for a quote to get your new boiler installed the next day and with no deposit required. They can help you save money on energy bills and you can choose to save on high upfront costs by paying for it with a monthly payment plan that will spread the cost over one or two years at 0% APR. It’s no different with a business. Older boilers are a money pit, thanks to costly parts, poor energy efficiency, and more regular servicing requirements. If the boiler at your retail business premises is old, consider replacing it sooner rather than later.
Cutting costs will help your business to obtain higher profits and keep all your stakeholders happy. If you have already followed these tips and cut as many costs as possible, you can look at alternative ways of improving profits such as increasing sales revenue.