The Truth about Sale Profits (and how it isn’t as obvious as we’d like)

The Truth about What You Made on Your Last SaleLast Friday a client of ours posted a really good question on our Facebook page. The question produced an excellent conversation here at Paladin, so I thought I’d share.

The client asked if we had a report showing the profit gained from items sold in discount sales. Many of our clients (maybe you’re one of them) frequently run sales in their stores. It’s understandable for them to want to know the success rate of those sales. How much sale profit was made? Was the sale worth it?

Answering this question is a little more difficult than you might first think.

When asked how much money a store made on sale-items, our founder Dan Nesmith drew the above number on the whiteboard.

That’s right, the store probably made nothing on the sale items.

Sale items commonly have zero or single digit margins. In other words, stores seldom make money on sale-items. So, what do you make from sales? Nothing. So why have sales?

Dan went on to explain that the profit from a promotion comes from the items that were bought along with the on-sale item, not from the on-sale item itself. Stores lose profit by discounting items. The idea is to make money on the extra items bought because people were drawn to the store by the sale.

Consequently, Paladin does have a report that tells stores how much money they made on a particular sale. This report looks at all of the receipts with one or more on-sale items and tallies up the profits made from all items on the receipt. This gives stores an accurate report of what sale profit was obtained.

This report can be found in Reports>Sales Analysis>Report Revenue from a Promotional.

If you have any questions or remarks, feel free to leave a comment.

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