How do low margin businesses make money?
How can you improve your profit margin?
The only way these types of businesses make money is by having trading volume. The margins are low but do a lot of transactions and the small margin becoems a big figure
Low margin businesses do make money - its getting the volume that is the hard part.
A good reminder ....
As @Hitesh Mohanlal has mentioned, the key is volume, and that means building up and maintaining a decent (and/or growing market share). However, I have seen several low-margin businesses use 2 keys to differentiate enough to create a loyal and passionate customer base.
The best example I can offer is a grocery store chain that operates mostly in the South-Eastern region of the United States. That chain is called Publix. Most grocery stores work on volume and economies of scale (the more they sell the better price they can buy at to stock their stores).
However, the reason Publix is so fascinating to me is that it isn’t one of those grocery chains that requires you to have a club card to get the good prices. It also doesn’t do over-the-top and unsustainable promotions or sales. Publix has possibly the best customer service I’ve ever personally experience from almost any type of business. Can’t find something? They won’t tell you what aisle it is in, they walk you to that aisle and ensure that is what you wanted. They also offer umbrellas near the exist in case it is raining so you don’t get soaked while trying to take your purchases to your vehicle and many other small touches like this throughout the store.
Additionally their store brand line of products are given as much care as name brand products. They don’t need to do that, they choose to do that, and their items are almost always less expensive and come in more varieties.
Lastly, they demonstrate excellence by including recipes with items featured in their weekly ads. They also have in-person cooking demonstrations, give out free samples, and have the recipes printed on nice cards that are free to take as well.
So you can see that in many ways a margin business can stand out by crafting a unique brand, having excellent customer service, and looking to add value to customers in ways that are intangible. So my recommendation would be to look at incorporating these ideas instead of just feverishly trying do more volume. The things I’ve mentioned will increase the volume because it helps build a reliable and passionate customer base. And the return on investment for a life-long customer compared to a one-time customer is important to keep in mind.