August 2023

Improving Retail Margins and Profitability: Practical Strategies to Consider

Learn practical strategies to improve retail margins and profitability for your business. Discover how to limit waste, leverage technology, enhance customer experience, and partner with ethical finance providers to achieve your goals.

For any retail business, your margin is the fundamental key to success. Retail margin provides valuable insight into a business's performance, indicating whether they're covering expenses and generating a profit or merely breaking even. However, for businesses to remain sustainable, it's not enough to merely survive or break even; the retail margin needs to be optimised, and profitability must be maximised. In this blog post, we'll take a deeper look at what retail margin is, how to calculate it, and practical strategies to improve retail margins and profitability.

Establishing your baseline

Before improving retail margins, you first need to establish your baseline. A quick reminder - to calculate your gross margin you need to be dividing the profit by sales revenue, expressed as a percentage. While the industry benchmark varies, the average across the retail sector is around 50%. Comparing your gross margin to that of your competitors and partners can help you determine whether you're at risk or ahead of the curve. From establishing your baseline, you can set realistic and measurable goals to boost your retail margins and profitability.

Strategies for improving retail margin and profitability

Limit waste & focus on efficiency

One of the quickest ways to improve retail margins and profitability is by limiting waste and improving efficiency levels. An efficient operating system ensures you're getting the most out of your inputs which, in turn, sustains profit margins. You should organise and review all aspects of your retail operations, from inventory control to staffing. Introducing green initiatives to your operations can save costs in the long run, and there are often grants or support available to help you implement sustainable solutions into your business.

Leverage technology to make smarter business decisions

Technology is a valuable asset to improving retail margin and profitability. Staffing, stock management, and logistics technology improves decision-making and efficiency, reducing inefficiencies that can impact margins. Automation is another opportunity for retailers to implement within any business processes and, in turn, benefit from time and cost savings. Leverage your usable data to identify trends and opportunities, making data-driven decisions that lead to profitable outcomes.

Add value to your customer experience

To increase sales volumes, retailers should enhance customer experience. Creating a positive experience for your customers through an enjoyable purchase journey can create higher customer value, leading to repeat business, new customers, and, in turn, increasing average basket size. Retailers can create distinctive buying environments, promotions, and simplifying payment methods and increasing touchpoints to introduce new products or services.

Use finance offerings to help avoid friction at the checkout

Frictionless payments can help boost conversion rates. By providing in-store and online payment solutions, you can offer your customers flexibility and accessibility. Partnering with an ethical finance provider capable of scaling with your business and supporting your aims is paramount to long-term growth.


There are several strategies retailers can implement to improve retail margins and profitability. By reducing waste, leveraging technology, enhancing customer experience, partnering with a fair finance provider, and establishing your baseline, you can reach your goals and improve your profitability.

To help you learn more about fairer finance solutions that empower your business, contact etika today.

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