Each year for the past 99 years, the North American Retail Hardware Association (NRHA) has conducted the Cost of Doing Business Study, the industry’s only inclusive retail benchmarking study.
This study is extremely important and beneficial to a home improvement retailer because it not only lets one compare his/her business to the industry average but also helps with making informed, valuable business decisions. To participate in this year’s study, click here.
Below are findings from the 2015 Cost of Doing Business Study, which includes data from more than 1,000 stores. The data below illustrates that a typical hardware store, for example, generates a profit margin of 2.9 percent and a high-profit hardware store turns a 7.1 percent profit margin. This difference leads to more than $100,000 in additional profit per year for a high-profit store, meaning that the high-profit store can invest more in inventory, additional employees or a store addition. How can your business go from being a typical store to a high-profit business?
Applied to Retail: First, determine what category you fall into—typical or high-profit—for your sector. If you have a profit margin less than that of a high-profit store, use the Cost of Doing Business Study to determine the areas where your spending is higher than the industry average. Maybe you have excess dollars tied up in payroll, or you are putting too many dollars into advertising and not receiving a good return. Thinking through these scenarios is a good business practice so you can constantly be aware of areas for improvement.
Also, to help make the study stronger and more impactful for the industry, participate in the 2016 Cost of Doing Business Study, and, in return, receive a free personalized financial analysis. Participation is easy!