5 ways POS systems for retail can help increase margins

In any retail business, margins are an essential indicator of business performance *. Gross margins help retailers to understand the performance and trends of individual products, and this data informs decisions about product mix, location and stocking levels. Net margin is a vital window into the overall health of the business. It provides key information about the growth potential, long-term viability and sustainability of the business **, and a higher net margin than industry averages is a strong indicator that a retailer has a competitive edge.

For retailers looking to increase their margins, whether by reducing operating costs, or increasing sales, one of the most effective tools they can use is modern, efficient, POS systems for retail. Let’s take a look at how to increase retail margins with technology, and the five ways that retailers can use POS software for increasing profit margins.

1. Customer experience

The right POS systems for retail can have a very positive impact on the customer’s experience in the store, which in turn generates an increased propensity to return more frequently, and to recommend the retailer to others. Efficient checkouts with a range of payment options help get customers through the store without hold ups, perfect for retail experiences such as grocery shopping. In other environments, mobile POS, where associates can engage with customers in aisle can offer a high level of service and make the customer feel valued. The associate has the opportunity to help the customer find alternative products if what they want is not available and/or for upselling and cross-selling, thereby increasing basket size – and margin.

2. Omnichannel

Today’s customers want to buy online AND in-store. They no longer distinguish between the two and flip between channels in the course a single transaction. Click and Collect/BORIS, curbside pickup, and Buy Online Return In Store are examples of this omnichannel retail approach. POS systems for retail that enable omnichannel shopping help the retailer to drive efficiencies and increase sales. Firstly, shoppers are more likely to buy from retailers who can let them buy the way they want to buy, increasing sales. Secondly, offering click and collect helps retailers to manage operational efficiency, by eliminating the cost of the most expensive part of the online shopping and delivery process -the last mile ****.

3. Personalised Promotions

Retailers know that customers want their interaction with the brand to be personalised. Personalisation lowers the cost of attracting new customers, lifts revenues and increases the ROI of marketing spend +. POS systems for retail that incorporate personalisation and customer loyalty programs can capture and analyze customer information, helping retailers to create compelling personalised offers based on the customer’s purchase history and preferences. It contributes to both sides of the retail profit margin improvement coin, reducing the operational cost of customer acquisition and increasing sales.

4. Inventory management

Retail is always a balancing act with regard to inventory control – and getting the balance right can potentially have a big impact on retail profit margin improvement. Too much stock of an item potentially means having to offer discounted prices in order to sell it; whilst a shortage means lost sales. Visibility is important too – knowing where stock is located increases the opportunity to sell it at full price – if a customer wants an item that is not in their store, the retailer can instantly locate it and get it delivered to the shopper. POS systems for retail that include inventory management can make a significant improvement in the way that a business handles inventory management and visibility, and can therefore contribute retail profit margin improvement.

5. Automation and streamlining

When it comes to operational efficiency, automated processes play an important role. Sales and marketing automation saves time and money and eliminates potentially costly human errors. Automated marketing campaigns can send out offers to loyal customers, driving up sales. An automated stock re-ordering process that places an order when inventory of certain goods fall below a threshold reduces the chances of stock outs and lost sales. Data analytics, reporting and insights can help to streamline key business processes – for example loss prevention, where a report identifying products/stores with the greatest losses, enabling retailers to put in place actions to address the issue, or pricing optimization based on sales reports showing the impact of different strategies.

There are multiple benefits of POS systems for retailers, and those include helping them to achieve every retailer’s goal – increased profit margins.

FAQs

How does an effective customer loyalty program impact margins?

One of the biggest marketing costs is that of attracting new customers, and whilst every retailer wants to do this, it’s important not to forget the goldmine that is their existing customers. By focusing on loyalty, retailers can ensure that their existing customers have a positive experience, and remain loyal to the brand. Research shows that loyal customers have a quadruple effect on sales and margin – they shop more frequently, they spend more each visit, they act as advocates, telling others about their great experience, and the retailer saves the cost of acquisition. So when it comes to margin, loyalty really is the gift that keeps on giving.

What is the role of data and analytics in increasing margins?

You can’t improve what you can’t measure. Unless a retailer knows where the problems are in their business, they can’t put effective strategies in place to address them. So it’s essential to understand what the gross and net margins are, and how they have changed over time. It’s also essential to be able to identify areas that are negatively impacting those margins, such as losses (for example by store, by product, by day and time) or particular products, or processes (such as returns for example). Data and analytics unlock this vital information and provide invaluable insights that allow retailers to improve their margins.

References:-

*https://www.forbes.com/sites/melissahouston/2023/11/08/mastering-the-profit-margin-formula-what-business-owners-must-know/
**https://www.businessnewsdaily.com/11096-determining-profit-margins.html
***https://www.investopedia.com/ask/answers/040215/what-are-best-ways-company-improve-its-net-margin.asp#:~:text=Companies%20can%20increase%20their%20net,cheaper%20sources%20for%20raw%20materials
****https://www.forbes.com/sites/forrester/2023/09/25/how-retailers-are-battling-slowing-sales-growth-and-tightening-margins/?sh=453122472182
+https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-personalization