The Grapevine

Cost Controls and Pricing for Retail Wine Shops

September 3rd, 2013

The old saying goes, “If you aren’t measuring it, it doesn’t count.” Do you really think your costs don’t count? Then you should be measuring them, and tracking your costs against revenue. [level-members]

Too often, we fall into habits and stop thinking about various details of our business. It’s human nature, an effective way to filter out the noise that can overwhelm us on a day-to-day basis.

But costs, pricing and profits are hardly noise – they’re about as important as metrics get for retail business. So it’s important to put systems in place that allow you to ignore the day-to-day noise without losing site of the important signals your business is giving you.

At a minimum, you need to review costs on a quarterly basis. In many states, your distributors’ pricing is pretty well fixed and varies only on volume. Not much you can do about that. But if you’re not noticing small price increases and not increasing your own prices, your profits drop. The math there is pretty simple.

And cost tracking and provide you with strategic insights, as well. Your cost reports, however simple, may point out shifts in the volume of various merchandise being sold. If a particular wine is growing over time, and you hold the line – or even go lower – on your pricing, you may increase volume. You might even decide to increase the amount you purchase to lower your cost structure.

None of this happens systematically if you aren’t paying attention to these simple metrics. And without processes in place, it’s easy for these important metrics to go unnoticed as you deal with the urgent business of the day.