How to Lower Expenses without Compromising Product or Service Quality

Editor’s note: With everything happening during the coronavirus pandemic, we’ve updated this post to include information on how to deal with cost-cutting during a sudden downturn. We hope you find this useful. And if you’re looking for more resources on how to deal with these trying times, have a look at Vend’s COVID-19 Retailer Action Plan.

Reducing expenses without sacrificing quality is a good practice in general, but it becomes absolutely critical when you’re facing an economic downturn. In this post, we’ll outline some of the ways that you can reduce your expense while still selling quality products and serving your customers effectively. 

1. Identify discresionary expenses

Identify your business needs vs wants, and cut back on the latter. Expenses like utilities, marketing, retail management software are examples of what would fall into the “needs” category. 

On the other hand, things like your Spotify subscription, snacks, certain travel costs, or luxury expenses would be considered “wants” and thus need to be minimized or eliminated, at least for the time being. Go through your credit card statements or checking account and identify your expenses over the last few months, then use that to figure out which costs should be cut.

2. Find ways to lower existing costs

You can’t cut every expense, but you may be able to lower some of the bills you’re already paying. Here are some ideas:

Credit card processing 

Examine your credit card processing statement to figure out how much you’re paying, then negotiate with processor (or shop around) to get better rates.

Here’a a tip: if your credit card processor or merchant services provider is using a tiered pricing structure that categorizes your transactions into qualified, mid-qualified, and non-qualified rates, then you are almost certainly overpaying for credit card processing. 

Not only that, but tiered pricing is notorious for its lack of transparency. As Merchant Maverick puts it:

Tiered pricing also makes it nearly impossible to determine how much of a markup your provider is charging you for any given transaction. Unless you’re willing to track down the underlying interchange fee that was charged for a transaction, you won’t know whether your provider is taking a fair and reasonable markup, or ripping you off.

You’ll be much better off going with a provider that offers flat-rate pricing, interchange-plus pricing, or membership pricing, as these typically offer lower rates and mor transparency.

Do you business a favor. Go through your merchant services statement, and if you find that you’re in a tiered pricing structure, switch providers ASAP. 


Call up your insurance broker and see if you can negotiate the terms of your policy. If your broker represents other providers, get their input on which insurance company or policy best fits your needs. 

And don’t be afraid to shop around. Obtain quotes from other providers, agents, and brokers and see how you can get the most bang for your buck.  


Keep finding ways to legally lower your tax bill. Talk to your accountant about any tax credits or deductions available to your business, and take advantage of them. 

In light of COVID-19, governments all over the world are implementing relief programs in the form tax deductions, credits, or payment deferrals. Explore the options that are applicable to your business and make sure you apply for them. 

Going beyond coronavirus relief, your business may be eligible for credits or dedictuions if you:

  • Implement sustainable and eco-friendly practices  
  • Enagge in research and development 
  • Accomodate customers and employees who have disabilities 
  • Offer insurance to workers 
  • Hire employees from specific groups — such as veterans, food stamp recipients, etc. 

To be safe, talk about the above points with your tax professional to make sure that you’re staying on the right side of the law. It’s totally ok (recommended, even) to find ways to save on taxes, but be sure to do it properly. 


With several states and cities implementing measures to prevent landlords from evicting tenants during this period, you and your landlord may be able to negotiate rental relief during this period. 

Some real estate companies are proactively working with tennants to accomplish this.

For example, Out of the Box Ventures (OOTBV), which owns over 6,000,000 square feet of retail space in the US, is supporting its tenants by decreaing operational expenses and forgoing its profits for the duration of retail store closures. 

According to a press release from OOTBV, the company is committed to passing along any further savings they may be able to receive from governmental or private institutions. These reductions will not take the form of a loan or promissory note, but instead will represent partial rent forgiveness for at least the next sixty days.

“We are offering our tenants rent relief. We have committed to withhold corporate profit taking, charge tenants the minimum rent possible, and pass along any additional savings that may be available from public or private entities,” says founder and CEO, Ophir Sternberg. 

We are asking that the tenants who elect to participate in this offering only pay their share of common area maintenance fees and taxes with no obligation to repay the balance of their rent for April and May,” announced Sternberg.

Your landlord may be doing something similar, make it a point to bring this up with them. 

Work with your vendors

Your suppliers might be open to negotiating better terms with you. Some vendors may allow you to return unsold merchandise or give you more favorable rates.

And you work with vendors or providers that operate on monthly plans, are you able to temporarily downgrade your subscription? 

Discuss with your providers and see if you can work something out. 

3. Streamline your operations

One of the best ways to lower your costs is to be more productive and streamline the areas of your business that are costing time and money.

Think about your business processes and identify tasks that you can automate. These could include data entry, staff scheduling, generating stock orders, etc.

Putting such tasks on auto-pilot helps you save time and lower your operating costs. Remember, time is money. The more you spend on manual tasks, the less time there is to do things that move the needle — such as selling more or serving customers.

Not to mention, manual tasks can sometimes be prone to human error (which can also be expensive). By automating them, you can free up time and resources better spent on making sales or growing your business.

Start looking for solutions that can replace manual work. For instance, if you’re devoting a lot of time managing staff schedules, you can look at employee management apps such as Deputy. Spending too much time writing product orders? Look for a POS or inventory system that automatically generates stock orders when inventory levels reach particular thresholds.

One example of a retailer that does a good job at automation is Crane Brothers, a contemporary menswear retailer. To save time and operating expenses, Murray Crane automated the task of transferring sales data to his accounting software. Rather than manually plugging the numbers into the program, he integrated his point-of-sale system (Vend) with his accounting software (Xero). He got the two tools talking to each other so that information is automatically transferred from one program to the next.

The result? Crane was able to free up time so he and his staff could devote more energy to helping customers. He estimates that the automated system in his store saves him forty to eighty hours a week —or one to two full-time employees.

4. Focus on customer retention

It’s more expensive to acquire new customers than it is to keep existing ones. That’s why it pays to have excellent customer retention strategies. While it’s important to invest in customer acquisition, it’s equally important to drive revenue from shoppers who are already buying from you. 

Here are a few examples:

Run data-backed offers

If you’ve been collecting customer information, now is the time to use it. Tap into the shopper data that you have (demographics, purchase history, etc), and leverage it in your marketing efforts. 

For example, if you know your customers’ purchase histories, then send them offers relevant to the products they bought in the past. 

The email below, for example, features products and brands that I’ve browsed and added to my wish list.

Nordstrom does this extremely well. The retailer is always sending product recommendations based on what customers have bought previous and the things they have on their wish lists.

This is just one of many targeted campaigns that you can carry out. Depending on your data, you could launch personalized customer retention campaigns based on information like location, gender, previous purchases, and more.

Explore the shopper data you have and consider the different ways that you can slice and dice your database.

Element of surprise

Implementing a “surprise and delight” campaign is another great way to engage existing customers. By surprising people with perks that they won’t see coming, you’ll make people happy and be ultra-memorable at the same time.

Check out what Expedia did. According to COLLOQUY, in 2010, the airline company sent a $100 coupon to select members of its Elite Plus program. The effort generated an increase in transactions by almost 10%. But what’s more interesting is that while just 10% of recipients redeemed the coupon, Expedia found that even those who didn’t use the offer ended up traveling more with them.

High-quality products and customer service

While loyalty programs and other tactics can bring in repeat business, the best strategy is to offer top-notch products and services.

Providing merchandise and experiences that exceed expectations leads to loyal customers and increased word-of-mouth. This, in turn, lowers the costs of customer acquisition, PR, and more.

Case in point: American Giant. The apparel store attracts customers not through traditional advertising or marketing, but by simply creating great products. Instead of investing in commercials, they invest in developing the best products in the market. They trust that their customers will not only purchase again and again but also become their advocates and spread the word.

The strategy has paid off quite well for the retailer. They have a loyal following, and their classic sweatshirt was even dubbed “The Greatest Hoodie Ever Made.” The product was so popular that at one point customers had to wait months just to get it. Now, that’s the power of producing exceptionally high-quality merchandise.

5. Sell fewer products

You may have products sitting on your shelves that are costing you money. Determine what these items are, then consider discontinuing them.

Doing this could help lower product development and marketing expenses. It could also free up capital tied up in inventory.

Consider the case of Scrubz Body, a natural skin care retailer. According to founder Roberta Perry, deciding to sell fewer items has saved them thousands of dollars.

“We had been working on ways to make more money and trimming expenses and realized the answer was in front of our face. The men’s line did not meet up with our true branding,” she said.

“The sample sizes cost us almost as much to make as the medium size. We had too many scents of each product. Something had to give, and it was those products.” Perry shared that they were able to lower expenses after discontinuing their men’s line because they had “fewer products sitting on the shelf, fewer labels to print, and fewer products or sizes to market.”

Not only that but the move also helped increased sales. “What is interesting is, with less to choose from, customers spend more. Go figure,” added Perry.

6. Sublet parts of your store

While this option may not be feasible while countries are enforcing lockdowns and social distancing, you may want to keep this tip in back pocket for the future. 

Subletting your location could help lower one of your biggest expenses — rent. Check with your landlord to see if you’re allowed to rent your space. If you get the green light, conduct a search for other shops who would be open to moving into your location.

One retailer that did this well is Metropolis, a gift-and-card shop in Seattle. In 2009, the retailer was hit by the recession and this prodded owner Terry Heiman to rent out the space.

After getting approval from his landlord, Heiman started subleasing a third of his store to other merchants.

According to, “Heiman spent $1,000 to install a loft-style wall between the spaces, and each store has its own entrance, address, and separate utility metering, making for easy division of expenses. He collects the rent and writes one check to the landlord each month.”

Consider doing something similar in your business. If your lease agreement permits it, find retailers who would be willing to move in so you can share location expenses.

7. Increase order quantities

In most cases, you can reduce your cost of goods by ordering larger quantities. Cook up ways to increase your buying power. Go through your inventory data and see if you can up the orders for some of your merchandise.

See if it’s possible to consolidate different orders. Team up with other merchants so you can combine orders and lower costs. This is something that many large retailers are doing. Take Walmart, for example. A few years ago, the retailer looked for partners who can purchase raw materials with them so they could increase their buying clout.

Final words

You don’t have to throw quality out the window to effectively lower expenses. By focusing on retention and by using resources you already have, trimming costs while maintaining high standards is completely achievable.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.

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