Further to my post Friday last week on Changes in the GP% mix in newsagency businesses, I share here analysis I do by GP group. I group products sold in my newsagencies by GP group. Note, these businesses do not have lotteries, tobacco or the usual agency product.
This analysis is for one day last week.
Reading across the table, next to each GP band label is the revenue for that band and the percentage of total GP earned by the products in that band.
I find the table useful as it focusses attention on where the business makes its money.
Too often newsagents get caught up with the volume of low margin product. Too often they seek the business of low margin product. yet is is the high margin product that is undoubtedly the most valuable to the business. This very simple spreadsheet reflects that.
Our gross profit mix is changing and has to change more. With rent increasing 5% year on year and labour costs increasing 3% and more each year, the business has to make more. These challenges alone are sufficient to drive us to pursue more efficient products. Efficiency to me is good GP products, higher end, turning at a sufficiently healthy rate to generate the growth in return for the business that is necessary to be able to stay ahead of the overhead increases.
I don’t do this analysis every day, week or even month. It is like taking a temperature reading. I do it quarterly or thereabouts, to ensure the business is sitting where I expect and at least where it needs to be.
Where there is all sorts of analysis one could do, I have found this simple spreadsheet useful in tracking the transition of the business because forward movement on transition is crucial to what we need to see in our businesses.
This GP band analysis can be done in any type of retail business as GP% is GP%, it does not require an analysis or understanding of specific products.
Change is the key here. We have to chase it every day because if we keep doing what we are doing we will only ever see the results we have seen and for many retailers that is not good.