Bob Hamilton Do you own a dollar store? If so, one of the challenges you will continually face is maintaining acceptable profit levels for your business. Prices of merchandise for inventory will be continually increasing. Freight costs will rise. Operational expenses will increase over time as well. If you have established a dollar price format for you business all of these increases must be managed to maintain profitability. You will need to continually focus on cost reduction in every aspect of your business.
Start by knowing the profit margin of all keys products in your store. For many of your high-volume items, it’s reasonable to expect to sell cases every week. With that kind of volume, properly managing cost and profit can result in significant returns. You know these products will sell, so buy extra whenever they are on sale. In fact, if your own a dollar store be sure you routinely shop for sale pricing with your wholesalers.
You must know the profit margin of all departments in your store. Some departments produce lots of sales, and lots of traffic for your store, but have terrible profit margins. You must keep those departments fully stocked to support overall store volume. Yet when you examine costs, it’s clear these are making little profit. Locate these products and do everything possible to cut costs. Locate new vendors with lower pricing. Buy products when suppliers have them on sale. Ask for volume discounts. Don’t accept lower profits without exploring every possible option for increasing the bottom line.
If you own a dollar store, you must know the overall profit of your business. Stay on top of your store’s profit. A high-level look should occur on a weekly basis and an in-depth look should occur every month. Understand where you are getting higher profits and work to build volume. Understand where you are getting lower profits and work to increase profit margins. Look for substitute products for unprofitable items.
Set goals to reduce your costs. No matter how well you are doing, never accept the current situation. Try every possibility to reduce costs. Focus first on merchandise costs. Every order should have a cost goal to meet. Every week should have a cost goal to meet. Manage your store to those goals. At times it will be tough to reach your goals. Whenever that happens start examining options to reach your goals. Explore new suppliers. Negotiate with existing suppliers. Look for substitute products. Speak with others in the industry and find out how they are driving cost out of their merchandise purchasing. Don’t forget freight costs. Examine creative options such as sharing trucks or reserving space in advance to reduce cost. Finally, set labor cost goals. This may mean some creative scheduling needs to occur. If that’s the case, make it happen.
Set goals to increase your profit margin. Over the course of a year merchandise inventory replenishment will be your biggest cost. That’s your chance to really impact the bottom line of your business. Don’t ever allow yourself to accept the status quo. Set new, lower cost goals and create actions to achieve those goals. Every penny you save in merchandise costs is a penny that goes to the bottom line. With the volume you’ll sell when you own a dollar store, those pennies add up fast!
To your dollar store business success!
Jamie
