Profit Makers Math | Front-End Overhaul | May 1, 2021

Giving it Away

Two years ago (I'm just now almost over the shock), two weeks before Mother's day, I walked into a pharmacy only to see huge signs that read, "All gifts 25% OFF Happy Mother's Day!". I was told that each year the signs go up the day after Easter. The staff was both proud and thrilled with how many gifts they were selling. Let's look at what's happening. Example: $50.00 MSRP-25% = $37.50 sale, cost of goods of $25.00, profit margin is $12.50; resulting in a 33.3% profit margin, assuming the items were shipped freight free. To truly be successful in selling gifts, you must average at least a 40% profit margin, and that is after paying freight. Anyone can run a sale and see product fly out the door; that is easy! But that is not a success. Everyone running poorly timed sales on a regular basis must realize that payroll can only be paid with profit.

Profit Margin Math

Recently a gift buyer purchased a line that had an MSRP of 2.5 times store cost. You have to wonder; what kind of profit margin is that? It is a 60% margin. For example, if the cost of the item is $6.00 and the MSRP is 2.5 times the cost, the retail price would be $15.00. ($6.00 +$6.00 + 3.00 = $15.00). To confirm the margin, take $15.00 - 60% = $6.00. A profit of $9.00. Nice.

Put 3 in 4

The month of May is when merchandisers are asked to update the Foot Care department. My former co-worker of 20 years and rock-star merchandiser Dave Gaudette reminds me that changing from a 4ft planogram to a 3ft plan could be a profitable idea. Using the 4ft space, applying a 3ft plan will allow you room to cross merchandise socks for those with diabetes and below-the-knee compression socks. He also mentioned that those with end-caps that are 54" high or less, use a 3ft planogram in a 4ft section and re-merchandise the department by not using the top-shelf that is normally positioned over peg hooks. Top shelves can cast a shadow on the product and at times make it difficult to remove the item off the peg.

Photos need to be well merchandised too!

I was viewing some photos on pharmacies' websites. I was surprised to see many pictures showed empty and partially empty shelves! I understand that some backorder items are causing the outs. However, customers do not see backorder reports; they see holes and wonder what is going on. If backorders cause the holes, then stage the photo by double-facing items until there are no holes. If the shelves are empty because you can't think of anything to put there, then cross merchandise product for the photo op. If your photos show "one of each" on the shelf (I did see those), take the pictures off the site. Choose a day this week to review the photos on your web pages.

Make it easy to give

Do you still have fragrances — perfumes from the last year or so? Gift wrap any duplicates you have and place them on the register and or pick up counters. When wrapped, fragrances have a better chance of selling, especially 3 or 4 days before Mother's Day. Of course, fragrances aren't the only potential gift for Mom that you could consider wrapping.