Hardware store worker checking prices of fasteners using an electronic tablet.

Turning to Technology to Protect Margins

by | Apr 30, 2024

Inflation, stock overages, rising labor costs, and constantly changing prices make maintaining margins challenging for retail businesses today. How are retailers coping with these issues? A new report from Simbe and Coresight Research shows that retailers are more and more turning to technology to help them improve store performance and protect their fragile margins.

“A lot of stores are being hurt by eroding margins in these inflationary times. Margin protection is more important than ever and that’s what technology offers,” says Dan Nesmith, founder and president of Paladin Data Corporation, a leading provider of point-of-sale and retail management solutions.

Nesmith says maintaining healthy margins is the product of many business practices rather than a cure-all tool. However, properly utilized retail technology makes achieving these best practices easier.

Intelligent ordering with electronic data interchange (EDI) and inventory management can eliminate dead stock and keep shelves optimally stocked.

Daily monitoring of inventory pricing information from suppliers lets retailers keep prices current.

Regularly reviewing the performance of inventory – what is selling and what margins are on those products.

Setting minimum margins by department or storewide.

Offering discounts that respect minimum margins.

Why technology?

The report surveyed 150 retail decision-makers throughout the country to discover how they are addressing business performance pain points. The responses showed that inefficient operations in stores reduced revenue by roughly 4.5% with more than 70% of them reporting losses of over 5%.

Inventory mismanagement was responsible for most of the losses.


Managing out-of-stocks


Executing incorrect pricing and promotions


Nearly 20% of retailers reported mispricing rates of 15% or higher

The report shows that approximately half of retailers are addressing these issues with investments in digital store solutions to help them better manage inventory control.

Stores running on sophisticated point-of-sale and retail management systems automate much of the tedious retail work and make inventory management and margin control more efficient. These systems provide vital sales data that help stores identify what items are selling and what aren’t, which allows retailers to eliminate nonperforming (dead) stock and free up shelf space for new, more profitable products.

Properly used, sales data can also remove the weekly chore of placing orders and changing prices. Inventory management systems can utilize this data to place suggested orders with a store’s suppliers, eliminating the need to count products. EDI ordering makes cost and price updates virtually automatic.

Protecting margins starts with intelligent buying

Pricing is directly affected by purchasing. The goal is to purchase at low prices and sell at high prices. However, how quickly sales occur after stores purchase also affects margins. An item could move quickly off your shelves but be a poor investment. While another item could have a poor margin or anemic sales, but still be a great investment. This depends on how those products are purchased.

Stock depth should be enough to meet expected demand for two to four order cycles and nothing more, Nesmith says. Purchase cost contributes directly to margin, but it’s not the most important factor.

Another study by Wakefield Research and Bossa Nova Robotics shows that 73% of retail professionals say that inaccurate forecasting is a consistent issue at their stores. Other key findings include:


66% say inaccurate pricing is a constant problem.


65% struggle with inventory tracking.


87% think inaccurate inventory is a larger contributor to revenue loss than theft.

These numbers demonstrate the importance of inventory management and how it can make or break a retail business. Allowing technology to assist in ordering helps savvy retailers thrive.

Ross Martin, owner of Caledonia Village Ace Hardware, uses just such a tool – Paladin’s Suggested Order™. He says it has allowed his store to keep an in-stock percentage of 97% to 98%, which he says helped him earn Ace Pinnacle status as a top-performing store multiple times.

“Our store uses Suggested Ordering 100%. Ace considers 95% really good and we’re always above that,” he says.

Some POS systems also allow stores to order from multiple EDI suppliers, which simplifies and speeds up ordering and receiving.

Keeping prices current

Price changes are routine in the industry. Brian Flande, manager of Phil’s Hardware in Central Oregon, says his stores get up to 4,000 price changes with each order. That makes keeping up with them difficult, to say the least, especially when finding and keeping staff is so hard.

Rising costs of manufacturing, labor and shipping lead to higher ticket prices. This all leads to many stores struggling to manage their inventory and maintain their profit margins.

POS systems provide current pricing when stock is received and can deliver regular updates which allows stores to maintain their margins.

“Every single night, Paladin picks up all the price changes from their suppliers. You press a few keys on your keyboard, and you pick up all the new retail prices,” Nesmith says of Paladin Point of Sale. “That one function helps you protect your margins. It’s hard to keep up on all the price changes without having access to all those changes.”

Create your own pricing plan

Every market is different. Some stores face stiff competition from big-box stores or online retailers. Other stores offer the only game in town. Their environment affects their pricing strategies.

Independent stores often struggle when trying to compete with larger stores on pricing. They can price products higher than larger competition and offset these prices with lower margins on faster-moving items and by offering convenience, personalized customer service, and ancillary services. This is an area where POS data can help.

POS systems and their reports monitor sales trends by identifying products that move quickly and those that don’t. Prices can be adjusted accordingly. They also provide daily data downloads that include price changes from suppliers. This allows stores to quickly adjust pricing to maintain margins.

Let technology work for you

Rosedale Town & Country began as a feed, grain and sawmill nearly 75 years ago and for most of those years served the farming community of central New Jersey. As those family farms turned into more residential housing, the store’s clientele and product line changed. To help better manage the change, the store’s management turned to retail technology to help them maintain their inventory, margins and profits.

The store’s business has improved from roughly $3.4 million in annual sales seven years ago to around $5 million in 2022. It has been using Paladin for six of those seven years.

“We’re using Paladin reports to find out what’s selling and what isn’t. That helps us improve our product lines and our profit. We’re really working on improving our product pricing and margins,” says Elizabeth Schreiber, the store’s manager.

Technology is an investment

“Technology is one of the most important investments you can make in the success of your business. You must think of technology as an investment that drives more business rather than an expense. Retail technology allows you to increase efficiencies, maintain better inventory control, and drive more customers to your store, all of which contribute to the growth and profitability of your business,” says Charles Owen, chief experience officer at Paladin Data Corporation.

More from Paladin

Webinars  |  Retail Science

Paladin Store  |  Help Portal

The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.