How to impact your Gross Profit Margin (GPM)?
When analyzing the pulse of a retail business, profit is at the center of focus. The difficulty resides in that profit is a moving variable from month to month. It may appear stable when you review your bank account’s cash flow at the end of each month with your accountant, however, the structure of how it was created (categories, SKUs) is usually fundamentally different from one month to the next.
Source: extract from There Performance Group’s monthly dashboard - Store Pulse
More importantly, tracking the profit structure allows a store to identify shifts in the consumer’s behaviors and capacity of a store to buy the inventory smarter and maximize one’s GPM throughout all SKUs. Therefore, equipping you with the knowledge to actually increase your monthly profits, rather than accepting deceptive stability.
When analyzing data, momentum/trends over 3/6/12 month periods speak a million more words than a static picture at the end of one month. However, the difficulty here is tracking consistently the same variables every month.
A number of different data points can be tracked, however, the key data we recommend for every store to track is the GPM contribution of each SKU per category.
The monthly breakdown enables to:
Take better informed decisions when selecting new products
Avoid stock outs or over purchases
Purchase inventory smarter (best price point)
Increase store GPM
Identify key business drivers and maximize sales levels