As one may be aware that gross margin from operations is critical for ensuring profitability of business.
There are many many innovative ways of increasing gross margin depending upon the industry one operates in.
Do find herewith some of the ways to increase gross margin.
- Avoid markdowns by improving inventory visibility
Markdowns are notorious profit-killers, so avoid them whenever possible. Start by improving how you manage your inventory. You should always have a handle on the merchandise you have on hand, as well as what your fast and slow-movers are. This will help you make better decisions around purchasing, sales, and marketing, allowing you to sell more products and reduce the need for markdowns.
- Elevate your brand and increase the perceived value of your merchandise
Find ways to increase the perceived value of your brand. You can do this by focusing on the emotional and lifestyle values that your merchandise can offer.
- Streamline your operations and reduce operating expenses
Automate repetitive tasks to save time and further reduce your expenses.
Lower your overhead by reducing wasteful spending and by using less expensive supplies (as long as you don’t compromise quality).
- Increase your average order value
Increasing the basket size is a great way to improve your profits. Do find ways to maximize their spend.
- Implement savvier purchasing practices
Ask for offers from Vendors
Do review Vendor’s supply chain cycle to synchronize with your Purchase Orders and do suggest implementable solutions to vendor to improve lead time cycle.
Review vendor Budgets and Vendor internal sales review cycle to alter quantity purchases (without increasing net inventory carrying cost for one’s business)
- Review Pricing and be creative with price increase
This step strictly needs to be taken in line with benchmarking with competition with Quality and service parameters.
- Optimize vendor/channel Relationships
Engage in joint business planning with vendor/channel partners
- Get Creative in offers
Be sensible and review the effect of promotions
Create personalized offerings basis segmentation.
- Staff motivation/Review effectiveness of retail chain
- Review and improve sales mix pattern
With subtle changes in Product positioning and other relevant exercises, one may be able to adjust sales mix resulting in higher gross margins.
- Eliminate waste (DOWNTIME)
D – Defects
O – Overproduction
W – Waiting
N – Non utilization of resource
T – Transportation excess
I -Inventory excess
M- Motion waste
E –Excesses in processes
- Integrate/Introduce new Products
- Alter Business line
- Outsource non-core areas
I am sure that there are many more ways to increase gross margin %.
Do revert in comments in case you come across any innovative ways to increase gross margins.
