Blogs published on 28-08-2020

You need to make a policy for tracking your retail promotions

POS SOFTWARE

This came up a few days ago, and what it has done is mucked up a shop's sales history file about profit.

Say the retail item cost is $10.00 and it costs you $5.00

What happens is you may decide to do a sales promotion in your shop, and it looks like this.

Here every pack sold means that each item sells at $6.66 and they cost you $5 each. So you have made $1.66 profit on each item. 

Now the retailers had some dead stock and wanted to get rid of some of it, so he introduces a new product into the mix. 

An item (B) that say also sells at $10.00 and costs them $5.00. I am trying to illustrate a point here. 

So your promotion offer now is a “buy this item and the other item free”. 

Now should your sales and profit figures be recorded in your POS system? 

Method (1) The first item at full price. 

So each pack means that you have sold each one of them for $10.00. Their cost is $5.00 thus giving you $5.00 profit on each one. Item (B) is considered being given away for free.

Or

Method (2) All the items considered sold at $6.66. 

They all have a cost of $5 each. So you have made $1.66 profit on each item. 

You need to decide. 

What has happened here is that as a shop did not make a policy. Some people rang it up using the method (1) and others used method (2). 

Now what is showing in history is a higher sales margin on one item then there should have been. 

You need consistency in tracking promotions if you wish to correlate your sales.

Make a policy first.

 

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