Retail management advice: review shop floor performance by gross profit

This is good everyday advice for any small business retailer in any retail setting. It’s easy to do and a powerful motivator to drive profitable change. Best of all, it’s 100% about your business, it’s personal.

With retail space usually costing between 11% and 15% of revenue, it is usually the next highest cost outside of the cost of stock itself. How well you use your space determines the success of your business.

Retailers often argue that rent should be lower. It could be that a different view of shop floor performance helps you achieve a better return.

Here are the simple steps to follow to do a GP performance floor map of your shop:

1. Take a blank sheet of paper, ideally A3, and roughly sketch out the layout of your shop, marking in display units, shelving, the counter – everywhere you have product. Include your back room if you have stock there.
2. Colour-shade the layout by department.
3. List the departments on the side of the floor plan.
4. Calculate the percentage of total space used for each department. This does not need to be accurate to two decimal places. List this next to each department you have listed.
5. Use your POS software to report on gross profit dollars earned by each department over the last year, or calculate it from sales figures knowing the average GP% per department.
6. Calculate the percentage of total gross profit contribution earned by each department and list this next to the floor space allocated to each department – on the floor plan map you have done.
7. Circle in green those performing the best, where the GP% contribution is more than the GP% space allocation, and in red those performing the worst.

Typically, a business owner doing this for the first time will have an ah ha moment, seeing something they had not realised.

We have seen business owners make changes including to floor layout, quitting suppliers and increasing stock weight for some departments.

You can take the analysis a step further by looking only at one department and analysing its performance by category, using the method outlined above.

Our specialty retail POS software can help with this and more business performance analysis. It offers gross profit and other data points useful in this shop floor map performance analysis.

Our goal is to help you run a more appealing, successful and valuable retail business. As retailers ourselves, we use our software this way every day.

We can help if you are interested. Here at Tower Systems we are 100% focussed on serving local small business retailers. We offer advice like that covered here to help local small business retailers thrive.

Find out more:  www.towersystems.com.au  1300 662 957  sales@towersystems.com.au

Thanks for reading.