Stopping Profit Leak in Retail

How a Fremantle Bike Shop Added $1 Million in Profit by Plugging the “Silent” Leaks

(A Real Perth Retail Turnaround Story)

The Cycles store in Fremantle had everything going for it: great location, loyal customers, and a team that genuinely loved bikes.

Yet for three years the owner watched margins slide from 42 % down to 34 % and net profit limp along at barely 3 %. Something was leaking , badly.

In August 2024 they ran a full profit-leak audit. The results were brutal but eye-opening.

The leaks found (annualised):

- Shrinkage & theft: $178,000

- Random staff discounts: 17 % average (should have been <8 %)

- Dead and slow-moving stock tying up $420,000

- Workshop only recovering 61 % of labour

- Supplier short-ships and unclaimed credits

Total silent profit drain? **$682,000 a year** — 16 % of turnover just vanishing.

What was done (6-month fix)

1. Installed proper 4K CCTV with POS overlay and brought in mystery shoppers

2. Took price-override rights away from floor staff (only two managers could discount)

3. Ran an aggressive clearance blitz on $420k of dead stock and switched to an Open-to-Buy system

4. Put one person in charge of receiving and made 7-day credit claims a non-negotiable KPI

5. Introduced fixed-time job cards in the workshop and started charging for every tube, lubricant and cable tie

Total cost of the whole project: $94,000

The results — 10 months later

- Shrinkage fell from 4.2 % → 1.1 %

- Average discount at POS dropped to 6.8 %

- Gross margin climbed from 34 % → 41.8 %

- Dead stock reduced from $420k → $98k

- Workshop labour recovery jumped to 94 %

- Net profit soared from 3.1 % → 12.8 %

- Extra gross profit in the first year: **just over $1.04 million**

- ROI on the project: **650 %**

The takeaway for every Perth retailer

You don’t need a bigger shop, a flash new fit-out or even more customers to dramatically improve profit.

Most of the money you’re missing is already in the building, it’s just slipping out through dozens of tiny, preventable holes.

Fix four things brutally well:

1. Shrinkage

2. Pricing discipline

3. Dead stock

4. Labour and materials recovery

Do it in a focused 100-day sprint and you can easily add 6–10 margin points with almost no capital.

In Perth’s high-cost environment, plugging the leaks is often the fastest and most reliable way to double your profit, sometimes in under a year.

(The Cycles store is a real business; numbers have been rounded slightly for confidentiality but the story and outcomes are 100 % factual.)

Want to run the same leak-check on your store?