7 Ways to Reduce Operating Costs in Your Retail Business
There’s no avoiding the fact that running a retail business costs quite a lot of money. While you can’t fully eliminate your operating costs, there are actually a few easy ways to reduce them. You can start saving on them by implementing a few simple changes in your business processes. Here are seven actionable ways you can apply to reduce your retail business expenses.
1. Break down your expenses & remove the unnecessary ones
There are a lot of expenses incurred by retailers, most of which may be spent on inventory. Audit your inventory costs and compare them to the value they provide to your business.
Figure out which items that are really important or profitable for your business and which ones are not. Check your inventory and make sure that no resources are dormant or in vain. If you find any items that are rarely used but always on your monthly supply list, then you should replace them with more useful ones.
2. Share your retail space
Is there an area in your store that you rarely use? Perhaps that empty space can help you pay for electricity, contracts, internet, and more. Make use of it by renting it to other parties. You can rent it as a meeting room, a studio or a co-working space.
If the space is big enough, it wouldn’t hurt you to rent it to another retailer. For instance, you can rent it to a coffee shop or an art gallery owner. They might not just help you gain money, but also bring more customers to your store. Isn’t that a good idea?
3. Reduce your shipping costs
If your retail business requires you to ship orders, your shipping costs could lead to bloated expenses. But you can actually reduce them. Your product packaging is important, but that doesn’t mean you have to spend so much money on it.
You can save on your shipping costs by removing some materials that are not too important. For example, your products aren’t put at risk for damage, you can replace the cardboard boxes you normally use with poly mailers. Or even if you sell fragile items, you can still replace your packaging materials with less expensive ones.
Also, take a look at the the shipping service you use. Delivery delays or damage caused by an incautious courier will just multiply your expenses, because you’ll have to re-ship the order or make a compensation as an apology to an unhappy customer. Thus, make sure the shipping service you choose is professional and reliable, so you don’t spend your money in vain.
4. Create an online store
In addition to helping you save on operating costs, creating an online store will also help drive your sales, because according to research, 82% of smartphone users consult their phones on purchases they are about to make in-store. By integrating an online store with your brick-and-mortar store, you can save on the use of space in your physical store. You may be able to rent or sell it. And even if you are overwhelmed to pay your business rent, you can fully transition to e-commerce and open a pop-up store at any time.
5. Negotiate with your suppliers
If you’ve been a loyal customer to your suppliers for years, then you can take advantage of your business relationships in an effort to reduce your operating costs. You can try to negotiate with your suppliers to give you discounts. Buying products in bulk can also help you reduce supply costs, as this can save your monthly supply costs.
If you buy goods through a third-party supplier (e.g. a distributor), consider buying goods directly from a manufacturer. This can help you get better prices as well as direct access to their other products.
6. Outsource your sales force
Staff salaries, compensation, and sales incentives cost a lot. You can reduce them by outsourcing some of your sales force. You don’t need to hire new staff to manage live chat (if you have an online store) or promote sales during peak shopping seasons. Outsourced staff can be very dependable and of course this will greatly help you reduce your labor costs.
7. Find an automated solution
Although it requires early investment costs, an automated solution can help you save your operating costs. It eliminates a variety of manual tasks that spend a lot of time and effort. This means you won’t have to increase the number of staff as your retail business grows.
In addition, an automated solution can simplify complex business processes, such as managing cash flow, controlling inventory and procurements, creating invoices and running marketing campaigns, generating financial reports, monitoring shipments, and more. A Cloud-based automated solution even allows you and your staff to work over the internet so you can work from anywhere (a great solution for an ecommerce business!). Not only does it help you save on operating costs and time, but it also improves the efficiency and productivity of your business.
Keep in mind that your product quality has to be your main concern. So make sure that you don’t sacrifice it while attempting to save on your operating costs. These seven tips can be implemented without reducing the quality of your products at all.