Updated April 4, 2024
A quick walk through the mall shows retailers trying to increase revenues with fairly dramatic sales.
But sales can hide the cause of death in many stores ... passive employees.
Let me explain…
Selling a bunch of merchandise for a loss, even if it generates revenues, often results from passive selling.
It takes the active selling of merchandise to get the full price.
But because your employees weren’t active and didn’t sell the merchandise, the product had to be marked down.
The price tag took a hit to sell the merchandise.
And that begs the question...
How do you rate your salespeople?
When looking at your KPIs (key performance indicators), are they the highest revenue generators or the highest profit generators? Both can bring profit to your store, but one does it more actively. A passive employee costs you money.
Salesperson A sells ten sale Widgets priced at $1000 this week. That’s $10,000 in revenue. (But those on-sale widgets’ really sold themselves anyway.)
Salesperson B sells five of the same-sale Widgets and upsells each customer an additional full-priced item for $350, making $6750 in revenue.
Salesperson A’s net profit to the company is $100 per unit ($1000 revenue—$900 cost of goods) times 10 units, which is a $1000 profit.
Salesperson B’s net profit to the company is $100 per unit times five units = $500. She was delivering an exceptional experience to the customer, so she easily sold the complete solution with the additional item, which had a $170 profit per item. $170 times 5 = $850. So, $500 + $850 for Salesperson B = $1350 net profit.
Salesperson B actively generated a higher profit for less revenue and spent less time dealing with five customers instead of ten.
When an employee has good upselling skills, they can do more with less...less having to engage strangers, less having to discover their wants and needs, and less having to run around trying to make a sale instead of the best sale.
If you look at how much the salesperson sold per hour, it indicates performance, but it doesn’t give a clear picture of what has been lost. Salesperson B generated 30% more profit but faced fewer customers in less time.
Think about how much that difference could be in a month, a season, a year...
A real example: I recently purchased an Armani suit on sale. After the saleswoman had the tailor fit the suit, she rang me up at the register. She never suggested obvious add-ons I would have purchased, including shirts, undershirts, ties, and shoes. She settled for crumbs without considering the feast. I spent something on a sale item but nothing on the full-price items.
Anyone can passively stand at a counter and ring people up.
And in some cases, they can generate decent revenue doing it. However, it takes someone with professional retail sales skills to read the customer, develop the relationship, and sell them a total package. That is reflected in the sale's profit, not the total revenue.
It takes a concerted group effort to ensure a retailer's profitability. When a crew is on board with that, they can drive profits and revenues.
While you may not know the profit margin for every sale, you have a good indicator of a sales superstar in the number of units per transaction. Rating them based on that key performance indicator will make them more inclined to suggestively sell more in the store, not just something on sale.
Increasing retail sales requires having your employees deliver balanced sales. Otherwise, you can have great employees who sell items that don’t require much persuading while your more expensive items sit.
See also, 3 Upselling Tips for Retailers
Refocus your employees on balanced sales to help them understand in a new way that add-ons are a must for the customer and the store.
When that happens, your margins and profits will grow, and so should your employees’ paychecks for doing the heavy lifting of getting more merchandise out the door.