Retailing in the modern world Pt III - The careful balance in maximizing profits

The goal of a business is to make profit. You need to increase profit in order to grow or sustain a business. You can increase profit by lowering costs and/or increasing revenue. How do you do this? That can literally be the million dollar question. It can also be the question standing between your business and prosperity. The answer can vary from industry to industry and the key to finding it depends on number of factors ranging from timing to personalities to ideologies. The answer will also change as the retail landscape continues to evolve at an ever increasing rate. 

When determining what path to take, remember that there is a delicate balance between reducing costs and increasing revenue. As an example, If you reduce costs by using cheaper parts, you may be making an inferior product. This may result in fewer purchases and more returns thus lower revenue. On the other hand spending too much money on something, like a mobile app for your company, can increase your costs and thus lower your profits.  

How do you know where to skimp and where to splurge?

As stated in previous posts in this series, the answer is different from channel to channel and industry to industry. What may work for the restaurant industry may not work for the wine industry. What works for a textile producer may not work for a clothing manufacturer. From a consultants perspective, how will you know how to advise your clients' positioning for optimal revenue growth? 

The key here is to really know your client's business intimately. Even if you know their industry, do you know your client's secret sauce? Do those industry secrets change the way various sales channels should be leverage? More than likely, its a resounding yes. Truly understanding an organization is a key component to turning a good strategy into a great one.

The next series of posts will analyze the various retail channels mentioned in Pt 1 of the Retailing in the modern world series: http://daxdude.blogspot.com/2014/05/retailing-in-modern-world-pt-i-business.html