Given that current trading conditions are tough and margins are being squeezed from all angles, how do you find sustainable strategies which improve your margins and secure retail success? Retail profit margins are fundamentally dependent on how much stock you can sell through at full price, avoiding heavily discounting lines. By introducing product testing early in your buying process you can safeguard your profit margins by ensuring you invest in the right stock.
Product testing improves your profit margins in a number of ways. Many successful retailers already gather authentic product opinions from shoppers on the Mallzee platform, gaining powerful insights data and early predictions on product performance. Product testing improves profit - and here’s why:
Get the most out of your best performing product lines by ensuring that you have the right stock levels to meet demand. Re-buying stock mid-season is costly, slow and often even impossible, so it is crucial to get the volumes right for big sellers from the start. For example; in the UK three percent of new products sell out on launch week therefore knowing what audiences think of a product before placing stock orders ensures you get the right products in the right volumes and improve your gross margin.
Product lines that do not sell hurt retail margins. Whether you end up selling heavily discounted products to the detriment of your brand reputation or disposing of overstock, bad product performance hurts your bottom line. Product testing can help identify poor performers (dogs) before you invest in them, which means you can either remove them from your collection or reduce order quantities to lower your margin risk.
By understanding which audiences and consumer groups each of your products appeal to, you can better target your marketing. Effective marketing spend optimised on the right channels and audiences is key to a positive ROI for successful retailers. Knowing where to spend your marketing budget and what products to promote can mean the difference between a strong profit collection and an under-performing one.
Pricing impacts margin, and optimising your pricing strategy is key to maximising profits. Savvy retailers use many different sources of information to set the right price, and a key component is market awareness and understanding how your products are likely to perform. By running product testing campaigns on your collection before you set your price points, you will have greater confidence in your performance predictions and can set your pricing strategy accordingly to ensure you get the best margin possible on each line, without ending up in a position of overstock or understock.
Data empowers your team to make better decisions. By understanding how audiences interact with your product; eg. whether they are popular with older or younger shoppers or if they are rated highly by audiences in the north or south of the country - you can invest your budget wisely, optimising marketing and ending up with significant improvements to your margins. Retailers who use Mallzee Insights product testing increase their profit margins by 3-6% on average. Talk to the Mallzee Insights team about how product testing can help your business, and find out what gains you can make to your profit margins.
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