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Retailers are continuously looking for ways to increase their growth and expand margins. The best type of growth is through existing stores, often referred to as “same store” or “comp” sales. As opposed to expansion from the construction of new locations. Not increasing the number of stores and lowering current expenses is an effective way in which managing SG&A can help expand margins.
There are several opportunities for retailers to lower SG&A expenses by continuously making business processes more efficient. In retail, store labor costs make up the largest portion of SG&A. Other areas include store maintenance and marketing expenses. Addressing these areas and focusing on efficiency, will allow retailers to achieve continued margin expansion and improve the customer experience.
For retailers who are looking to lower operating expenses, it makes sense to focus on the largest component of SG&A expenses, store labor. Retailers want to reduce their labor costs, but at the same time ensuring that the quality of their service remains constant, or improves. Reducing the total number of employees is an easy place to start, but you can only cut so much before affecting the customer experience.
Another common labor problem in retail companies involves time and money spent on non-selling, or tasking, activities. Citigroup estimates that tasking could represent more than 60% of labor costs for many retailers. Utilizing technologies that improve business processes will greatly decrease these costs, and allow employees to focus their time on more important issues like improving customer service.
Profit amplification enables retail to increase same store sales and increase margin expansion from current operations. Through the use of pattern-seeking algorithms, patterns of poor operational behavior and compliance issues are identified and analyzed in order to turn these trends into profit and growth opportunities. With labor, identified patterns of hours with a higher percentage of sales will provide the retailer with opportunities to more accurately match labor with demand. Tasking is also more efficient with scored ranked opportunities that eliminate false positives. Employees are directed towards the most valuable opportunities, utilizing the best practice solutions to improve efficiency. Usage and trust increases as valuable opportunities are targeted by the elimination of false positives.
Profit Amplification provides unrealized opportunities to reduce costs and increase same store sales. By consolidating services and sharing best practice solutions with all stores in the company, retailers can ensure that each store is working as efficient as possible, in turn reducing expenses and expanding margins to the highest achievable level, allowing for operational excellence in the ordinary.
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