3 Ways to Strategically Reduce Costs and Enhance Profitability

1. Product profitability. Strategic cost reduction begins with a shift in mind-set, getting away from simply revenue and gross margin to true net profit of products inclusive of all costs related to marketing, delivery, service, returns, etc. Once this is available, you can make intelligent decisions regarding marketing strategies, SKU rationalization, product mix, supply chain processes, pricing, aligning assortments with customer value and other things. A multichannel retailer recently used such insight to prune nonessential, unprofitable SKUs and drive more than $25 million per month in net profit.