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How to improve retail profit margins

While running a retail store can be a dream come true, it’s also hard work. As tempting as it is to hold big sales events to entice customers, or to give discounts away to everyone, profit margins will always be looming over you.

This is especially true today as brick and mortar stores struggle to compete with online rivals and in the current challenging climate. And, many merchants are reporting shrinking profit margins.

But, your profit margins are something you can measure and something you can always strive to improve. As a retailer, you should know whether they’re increasing, decreasing or static. That way, you can learn how to stay ahead of the game.

In this article, we’ll talk through the ‘how tos’ when it comes to increasing your profit margins, so you can be confident you’re making as much profit as you possibly can when you’re battling with online stores.

A great place to start is by finding out how SumUp can help your business to grow...

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Be smart about discounts

When it comes to improving retail profit margins, discounting may seem counterintuitive. However, there are ways to make sure that cutting prices works in your favour.

Before you start adding discounts to your products or services, consider the following:


Timing is key when discounting products, there’s a thin line between too soon and too late, especially when it comes to seasonal discounts.

It’s good to remember:

  • People will always shop early

Whether it’s for Christmas presents, Easter eggs or even back to school supplies, there'll always be crowds who shop early. Why not offer ‘early bird’ discounts to entice them into your store?

  • Customers shop around for the best deal

Especially when it comes to gifts. Make sure you’re offering competitive discounts to get them to choose you.

  • Optimise for mobile shoppers

Even when shoppers are physically in your store, they’ll likely be searching online to find a better deal. Make sure your website is optimised for mobile and all of your offers are up to date online because according to Google there’s been a 15% rise in mobile search queries in-store.

Taking timing into consideration will ensure you’re in the best position possible to compete with your rivals. If you hold onto items for too long, you’ll have to sell them at a reduced rate, which could harm your profit margins.

The end of the month is also a great time to introduce offers because people get paid - so they’re instantly in the mood to go shopping. Payday promotions are a great way to make extra profit, with a small amount of effort every month.

Be sensible

Before you start implementing discounts, think sensibly. Ask yourself questions like; how many sales has this promotion brought in? How much revenue has it made? Have I considered all costs and overheads?

With the answers to these questions, you’ll never be left in the dark. You’ll know exactly what kind of improvements you can make, which is precisely the position you want to find yourself in.


Customers love a personalised offer, so much so that research conducted by Salesforce found that 53% of customers would exchange their personal details for personalised offers. So, it’s a good idea to consider tailoring your offers and discounts.

Not all customers will respond to the same things, and they certainly won't all have the same budgets. Consider that some may need a 50% offer to entice them, while others may need much less. There are plenty of ways that you can distinguish which kind of offer you should use. Start by taking a look at these ‘best practices’ to follow when personalising offers:

  • Know your customer: go through purchase histories, analyse your customer data and offer discounts to suit different buyer behaviours.

  • Be strategic with pricing: align your pricing strategy with your customers’ buying behaviours.

  • Package your offers: cross sell with add-ons. For example, if you’re selling flowers, how about offering plant food, plant pots or personalised cards.

  • Get the timing right: thank loyal customers or offer discounts to customers who are at risk of leaving you. Or even take advantage of different times of the year, such as peak shopping times and seasonal sales.

  • Sell where your customers are: promote offers through your customers’ preferred channels, whether that's in-person, on receipts and vouchers or via email.

To achieve this, conduct some market research to test what types of discounts different customers would prefer. This can be done via emails to customers who sign up for your mailing list or in-store at the point of purchase and you could even offer a small incentive to encourage them to take part.

Sell smarter

Your extra profit may just be staring you right in the face: your existing customers.

Looking to increase their basket size or average order value is a fantastic way to improve your profit margin, as the hard work is already done - they’re invested in your brand or product.

Start by upselling and encouraging impulse buys or unplanned purchases. Take a look at your retail merchandising strategy in order to maximise the effect. You need to work towards hitting the right mental triggers: want, need, urgency, value, and excitement.

Upselling is not only easier than selling to new customers, but it also costs less, which is a bonus. It requires a lower marketing budget and less selling time, meaning you’ll see improvements to your profit margins.

SumUp's Sales team can help you in creating customised offers for your business.

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Increase your prices

One of the most obvious ways to increase profits is, of course, to increase prices.

Many retailers are understandably nervous about doing this. But, not all customers will be looking for the cheapest buys. Many consumers make purchasing decisions based on quality or personal value.

If you’re looking to increase your prices, try to get creative.

Look at your top sellers and raise the prices of these first. Doing so will be especially effective if you don’t have much competition on your most popular products or services. Then adjust the prices incrementally as price changes are hard to reverse if they go too high.

Make sure to watch your sales figures vigilantly to be certain sales aren’t adversely affected.

Use systems such as tiered pricing, which are different types of the same product for different prices, i.e. basic and luxury. This helps to introduce the price increases and, psychologically - the customers feel like they are getting a choice, not just items with expensive price tags.

Pick the right payment provider

Creating a great customer experience is a surefire way to encourage customers to spend more and keep coming back.

When customers arrive at your till point, confirmed purchases in hand, it should be a quick and easy process for them.

Retail customers preferred payment method is card payments, closely followed by electronic devices. So, have multiple payment options available to make it as easy as you can for your customers to complete a purchase eg. card, cash, Apple Pay etc.

You’ll need to choose a provider that gives you the best possible service and rate. Look for:

  • The best transaction rate possible

  • Accepts all debit and credit cards

  • Contactless, magnetic swipe and chip and pin available

  • No fixed monthly costs

  • No contract or paperwork

  • Bluetooth connection

  • Compatible with all devices (eg. apple/android) 

  • Good customer service. 

SumUp provides a transaction rate of 1.69%, and proudly encompasses every single one of these points. The Sales team can also discuss personalied offers for you and your business and you can get in touch by filling out the form below.

Having the correct POS equipment helps to enhance the customer experience. In turn, this will encourage repeat visits and sales.

SumUp provides a range of products to suit your needs, including card readers and POS systems. SumUp’s POS system is perfect for your retail store with a digital cash register that can be accessed on your tablet, a back office system in the cloud and reliable hardware.

To learn more about how using SumUp can benefit your retail store, click here.

Evaluate your own costs

Profit is, of course, the difference between revenue and costs. Most people focus exclusively on increasing revenue, but you could have just as much success cutting costs.

Consider renegotiating the costs of your supplies or services, particularly if you haven’t done for a while. This could be as simple as trying to pay less for:

  • Cleaning services/supplies.

  • Stationery

  • Internet services

  • Electric and gas bills

  • Ground rent

Smart meters are now offered to all businesses. They aren’t compulsory, but can help you keep track of your energy payments. You also won’t be stung by bad estimates as you’ll get significantly more accurate readings.

If you have multiple stores, in multiple locations, running your business in the cloud will be beneficial. Cloud technology will allow you to run multiple stores, from just one physical location. This will mean smoother business operations, therefore, improving margins.

Reward loyalty

You shouldn't be looking at your customers as one time visitors, also look at their lifetime value - this will affect your profit margins more substantially.

Loyalty schemes are proven to incentivise purchases and keep people coming back to your business.


Your profits are the life-blood of your business, achieving a high level of profit is essential in order to keep your business going and growing.

Knowing where you are with your profit margins will not only keep you on track but will help determine where your business will be able to go.

By following the tips above and taking inspiration from the examples included , you’ll be able to work on strengthening your profit margins. So, take control, make changes and start to earn the profit that you and your business deserves.

Ashleigh Grady

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