Set and Achieve Lower COGS when you Start a Dollar Store

One of the biggest challenges facing every person who decides to start a dollar store is how to keep cost-of-goods-sold numbers under control.  After all, everywhere you look prices are rising.  Freight costs are growing, dollar store merchandise costs remain on an upward trend.  Yet if you are to succeed there must be a reasonable profit margin after all else has been paid.  In this article we will focus on cost-of-goods-sold, including merchandise cost plus freight.  We will examine tactics to monitor and improve those costs for your store.

It’s important for you to start a dollar store acknowledging dollar store merchandise cost reduction will be an ongoing, long term effort.  With continued upward cost pressure, you can’t expect to maintain or even lower merchandise costs without a focused effort.  Efforts will need to be driven down to the every-order level.  Yet performance monitoring requires not just a look at each order you submit, but also weekly and monthly roll-ups to make sure the overall result is being achieved.

Be sure to monitor the projected cost of goods for every order before it is submitted.  Adjust the product mix and quantities to bring cost-of-goods-sold in-line before finally submitting an order.  Remember to recalculate once an order arrives.  You can then adjust for freight costs and out-of-stock items to create a final COGS for each order.  Roll-up the numbers on a weekly basis to make sure you are on-track.  Do the same thing at the end of each month.

Your overall goal should be to continuously reduce the COGS for your dollar store merchandise from month to month.  Set monthly goals and measure your store’s performance against those COGS goals.  Step down each month in-spite of the increases you will see going on around you.  Remember the huge impact that even a one-cent decrease can have on your store’s profit for the year.

If you start a dollar store invest the time to really manage COGS for your store.  Know your suppliers.  Know which offer the lowest prices on the core dollar store merchandise you must have in-stock for your shoppers.  Continuously be on the outlook for new, lower cost suppliers.  Test your buying frequency and other techniques to cut costs at every available opportunity.  As you see the positive impact this has on your dollar store business you will be happy you made the investment of time and effort to cut the cost-of-goods-sold for your store.

To your dollar store success!