A quick walk through the mall shows retailers are trying to increase revenues with some fairly dramatic sales.
But sales can hide the cause of death of many stores…passive employees.
Let me explain…
Selling a bunch of merchandise for a loss, even if it generates revenues, often is the result of passive selling.
It takes the active selling of merchandise for it to get full price.
But because your employees weren’t active and didn’t sell the merchandise, the product had to be marked down.
The price tag took the hit in order to sell the merchandise.
And that begs the question…
How do you rate your salespeople?
When looking at your KPIs (key performance indicators) are they the highest revenue generators, or are they the highest profit generators? Both of these can bring profit to your store, but one does it more actively. A passive employee costs you money.
Let’s say salesperson A sells 10 sale Widgets priced at $1000 this week. That’s $10,000 revenue. (But those on-sale widgets’ really sold themselves anyway.)
Salesperson B sells 5 of the same sale Widgets and in addition upsells each customer an additional full-priced item for $350, making $6750 revenue.
Salesperson A’s net profit to the company is $100 per unit ($1000 revenue – $900 cost of goods) times 10 units, so that’s $1000 profit.
Salesperson B’s net profit to the company is $100 per unit times 5 units = $500. She was delivering an exceptional experience to the customer, so she easily sold the complete solution with the additional item which had $170 profit per item. $170 times 5 = $850. So $500 + $850 for Salesperson B = $1350 net profit.
Salesperson B actively generated a higher profit for less revenue, and also spent less time doing it, dealing with 5 customers instead of 10.
When an employee has good upselling skills, they can do more with less…less having to engage strangers, less having to discover their wants and needs, and less having to run around trying to make a sale instead of the best sale.
Why This Matters
If you just look at how much the salesperson sold per hour, it gives an indication of performance, but it doesn’t really give a clear picture of what has been lost. Salesperson B generated 30% more profit but faced fewer customers in less time.
Think about how much that difference could be in a month, a season, a year…
A real example: I recently purchased an Armani suit on sale. After the saleswoman had the tailor fit the suit, she went to the register to ring me up. She never suggested obvious add-ons I would have purchased including shirts, undershirts, ties and shoes. She settled for crumbs without considering the feast. I left having spent something on a sale item but nothing on the full-price items.
Salespeople, Not Clerks
Anyone can passively stand at a counter and ring people up.
And in some cases, they can generate decent revenue doing it. However, it takes someone with professional retail sales skills to read the customer, develop the relationship, and sell them a total package. That is reflected in the profit of the sale, not in the total revenue.
It takes a concerted group effort on all fronts to ensure a retailer is profitable. When a crew is all on board with that, they can drive profits and revenues.
UPIs and KPIs
While you may not be able to know the profit margin for every sale, you have a good indicator of a sales superstar in their number of units per transaction. Rating them based on that key performance indicator, they will be more inclined to suggestively sell more in the store and not just something on sale.
Increasing retail sales requires having your employees deliver balanced sales. Otherwise you can have great employees who sell the items that shouldn’t need much persuading, while your more expensive items sit.
See also, 3 Upselling Tips for Retailers
What To Do
Refocus your employees on balanced sales to help them understand in a new way that add-ons are a must. Not just for the customer, but for the store.
When that happens your margins will grow, your profits will grow, and so should your employees’ paychecks for actively doing the heavy lifting of getting more merchandise out the door.
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– Doug Works, Executive Director BRA
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