13 ways to make your merchant business more profitable

With builders' and timber merchants’ confidence on the rise*, despite supply chain challenges, things could be looking up for the construction supplies sector. Demand is still sky high and the majority of merchants nationwide surveyed for The Pulse by MRA Research are forecasting strong sales performance and growth in the next six months.

Increased turnover is great, but it’s vital to ensure you are also increasing (or at the very least maintaining) profitabilit. And when you’re flat out busy and stretched to the limits, it’s not always easy to keep an eye on every ball.

We have put together a list of 13 ways to make your merchant business more profitable. Some are quicker wins than others, but every item on this list is important. What would you add?

1. Grow your customer base

Simple, right? Just get more customers! Easy!

But how? Well that’s a bit more complicated and will rely on a great reputation for reliability, service and value.

You might want to start by analysing your existing customer base. Who do you sell to most? Who don’t you sell to? Are there particular areas, trades or demographics you’d like to reach but aren’t? How could you start speaking to that sector, and what products or offers could you highlight to attract them? Do you sell online? Adding eCommerce and upping your digital marketing game is often a great way to widen your customer base – and statistics show that growing an online customer base can benefit your branch performance too.

How do you go about identifying new customer opportunities?

2. Increase basket value

One of the best ways to grow your profitability is to get the people already purchasing from you to buy more each time.

How? Again, analysis will be your friend here. Look at what customers buy and when. Are there related products you could range closer together? Accessories and add-ons can be enormously valuable – not so long ago, Sainsburys identified than a tiny incremental basket increase would transform their business and lo and behold, recipe-based shopping came along to encourage those little extras, which added up to big profits.

How can you encourage your customers to pick up something extra?

3. Increase basket frequency

Yes, getting customers to spend more each time they shop is great, but so is increasing frequency. And how do you do that?

Often, it’s as simple as communication. If a customer buys particular products regularly, remind them about it, or offer incentives for advance orders. Use bouce-back offers (buy this now, get a discount next time, with a time limit) to encourage return trips. Loyalty schemes can work a treat in these situations, as can regular product updates, in-branch events, launching new lines and email reminders.

How else might you be able to encourage customers to shop with you more often?

4. Protect your margin

Now, this sounds a bit obvious, but it’s really, really important, or you'll undo all the good the previous two steps can achieve . The overall benefit of increased turnover is completely lost if it’s not done profitably. If you’re not making a healthy margin, is it worth the extra resource and effort needed to make the sale?

One way to do this is by ensuring you’re using a system with built-in margin protection settings. It’s a great way to empower your sales team to strike deals with customers and offer incentives, but with the safety net of margin protection which means they can’t process a loss-making sale without express permission. No costly mistakes, but also lots of time saved negotiating with managers.

Did you know that eCommerce tends to return a higher margin that in-branch sales? It’s a combination of lower operating costs combined with non-negotiable pricing – and you might be surprised at how many customers are quite happy to pay a slightly higher price for that added bit of convenience.

5. Work with the right customers

The notion that the customer is always right is a little outdated, and actually it’s really important that you know which customers are good for business, and which could be costing you dearly.

Modern ERP systems and finance systems should be able to tell you very easily which customers are worth your time and effort, highlighting those who regularly default on payments, miss credit deadlines or don’t order enough to justify the level of discount they currently receive. Having that information readily available makes it so much easier to make a call on when to agree the deal or walk away, when to play hard ball on the invoicing and when it might be worth investing a little faith and giving more support. You know your customers better than anyone, but your software can help you see the true value of their business and make an informed decision.

Do you know which of your customers are good for business and which are costing you money?

6. Work with the right suppliers

In a similar vein to the last point, working with suppliers you can trust to be reliable, accurate and flexible really pays off. Again, your software can help here, letting you compare costs, delivery track record, price fluctuations over time, product ranges and delivery timings easily and quickly. You may even be able to use that information to negotiate better pricing or faster delivery, or simply to decide for or against using a particular supplier.

How do you choose your suppliers? And how often do you monitor their performance?

7. Forecast more accurately

OK that’s a big one, and it’s no easy task. We could in fact write an entire series of blog posts on just this one point, but for the sake of brevity, we’ll sum it up: use technology to your advantage here. Having the right information about seasonal shifts, product sales trends, pricing changes and availability issues can really help you to raise your forecasting game and make informed decisions about what to stock more of, and what to run on a leaner model.

How confident are you in your forecasting?

8. Optimise your stock profile (and mana