In the hope of driving customer traffic and enticing the customer to buy in this challenging economy, retailers both small and large are offering non-stop discounts on much of their merchandise.

While discounting usually drives volume, it comes at a great cost: store profits. Do too much of the wrong type of discounting, and you'll find your store without enough money to buy more merchandise and pay the bills (and yourself).

Use these tips to keep your retail store margins healthy in this era of discounting:

1. Emphasize your more profitable merchandise through in-store signage, featured displays, suggestive selling, advertising, and marketing.

2. Feature merchandise that your customers cannot find elsewhere. Exclusive products allow you to get higher margins even if discounted.

3. De-emphasize low margin merchandise or items your competition is slashing prices on. While you may want to advertise a loss leader to drive traffic, you do not want to give prime selling space to these items. If inventory money is tight, cut back on the amount of lower margin items you stock.

4. Clear out your slow moving merchandise by taking discounts on these items monthly. Discounts on slow movers give your bargain seeking customers the deals they are looking for and allow you to turn this inventory into cash.

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