*** How Much Should You Spend on Computerization? ***
According to Price Waterhouse Coopers...
The average retailer spends 2 percent of revenues on computerization (IT) per year.
This means that a store doing $250,000 per year in business will spend an average of $5,000 per year on computerization and automation (or about $20 per day) and a store doing $1,000,000 in business will spend $20,000 per year on computerization.
On average, your investment should yield at least 5 times your investment in greater profits. Therefore, a $5,000 per year investment ($20 per day) should yield about $100 per day (or $25,000 per year) in extra profit (for a retailer doing $250,000 in business per year). A retailer doing $1,000,000 per year in profit should yield an additional $400 in profit per day, or $100,000 per year in additional profits.
In short, to figure out your increased profits from computerization, just multiply your sales by 10 percent. So, if you are doing $500,000 in business per year, computerization will yield an average additional profit of $50,000.
Will your profits go up by 10 percent by computerizing your retail store? The conventional wisdom is "yes." We think so. Most of our customers are amazed by their results. We have a local restaurant, the owner of which claims that his gross went up by 50% after computerizing by reducing the amount of free food and drinks given away for free to customers by his waiter staff.
Where do increased profits come from?
Decreased theft. When your employees know that you are monitoring the inventory, loss due to theft dramatically decreases. Your employees become more likely to monitor your inventory and magically reduce unexplained inventory loss. Add a $79 fake video camera (it looks real but is not connected to anything), and you can reduce theft even more.
Reduce Inventory Shrinkage. This is a different type of theft. Most stores have significant inventory shrinkage due to reasons other than theft. For example, a waitress may offer a customer a free drink (or just give it to the customer). Or, a store may throw in a free pair of shoe laces with the purchase of a pair of shoes. Both instances may be good for your business, but they are not monitored and could lead to additional shrinkage.
Better Inventory Control. Know which products are selling the most. Know which products give you the greatest profits. Most retailers believe they know which products are their best products. Most retailers are surprised with the results when they actually see the information on paper. Just seeing a report of your 50 best and 50 worst-selling products can give you a new insight into your business.
How much profit did you really make today? You may know how much money is in your cash register, but do you know how much of that money is your profit???
Quicker, more accurate checkout. Customers do not like waiting on line. By properly computerizing your store with barcodes or touch screens, you can checkout a customer much faster than using an ordinary cash register. In addition, your checkout will be far more accurate.
Get those email addresses and mailing addresses. By obtaining the email and mailing addresses of as many customers as possible, you can increase sales by 10 percent or more. This really works. If you send post cards or emails to your customers with your specials, sales, and other information, your sales WILL increase by 10 percent or more.
Add Coupons to your receipts. Take 10 percent off your next purchase made on Tuesday (your slowest day). Buy 2 and get 1 free. Coupons always work and can add 5 to 10 percent to your gross.
Add all of the above up and you can easily see how computerizing can easily add 10 percent to your profits.
Once again, retailers spend 2 percent of their gross revenues on computerization (IT). Most businesses spend 8 percent of their revenues on computerization. Retailers in general spend far less on computerization than other types of organizations and businesses. The good news the forecast for 2010 is a number higher than 2 percent. Retailers are beginning to realize that computerization pays off significantly.
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