Various influences from outside decide the profitability and bottom line of a retailer. It is important that a right price is fixed for getting the profit. Retailers engage in the business in order to get a profit but finalizing the type of products and fixing the prices for the same will not be easy. It is important to know the costs attached to the products before we can work out the strategy for retail pricing for fixing the exact price. It is the cost of the products and the operating expense that play a role in determining the product cost.
The Retail Blogger.The handling charges, shipping expenses, and the money paid towards the product are included in the total cost of the goods. Operation cost of the business includes the cost of office supplies and payroll. Irrespective of the plans used for the pricing, the expenses towards operation of the business and the cost for getting the goods should be considered for fixing the retail price. If the products are priced below the cost, no profit can be achieved by a retailer. facebook.
Plans for retail pricing
Once we know the actual cost of the products, we must also find out how the competitors are fixing the price for their products. It is essential for the retailers to analyze the means of distribution and find out the amount the market will pay. There are many strategies for pricing and each one of them is adopted for different circumstances. Some of the often-used strategies for pricing are given here:
Price fixing by Markup:
A pre-determined profit margin or a specific percentage can be added to the cost of the products to calculate the markup on the cost. When the dollar markup is divided by retail, markup on retail is arrived at. It is important that the basic markup is fixed at a high level so as to cover some expected expenses and discounts so that a good profit is achieved. Retailers have the option of fixing different levels of markups for different products if they handle variety of products. retail sales forecasts.
MSRP or Manufacturer Suggested Retail Price is the plan followed commonly by the small retailers so that they can prevent a dispute of prices and at the same time earn a good amount of profit. Minimum advertised prices are fixed by the suppliers and they also advice on the retail pricing. When the vendor fixes the retail prices, the retail seller has no say in the process of fixing prices. The retailer is at a disadvantage when the prices are pre-set.
Pricing at competitive rates:
It is the option of the consumers to go in search of the best prices possible. Excellent customer service in case of taking up a competitive pricing will help the retailers in winning the competition. Fixing the price below the competition level means that the prices are fixed lower than the ones fixed by the competitor. This planning will work out well when the retail trader bargains to get the best price and creates his own strategy to deal with the price issue.
Fixing high price or fixing price above the competitive pricing is accepted in case of rare customer service. When the retailers are able to have stock of better quality goods which are not available with their competitors, they can make profit by fixing higher price for their products.
When the consumer presumes the price to be quite reasonable, the retailers use the psychological pricing and fix the price at a certain level. One of the common methods is fixing the price in such a way that the same ends in odd numbers. It is assumed that the consumers would want to round off the figure of $ 9.95 to $9 than paying $10.
Other strategies for pricing:
Keystone pricing was used often earlier. Earlier products were priced by doubling the cost paid for the products but nowadays the retailers are not allowed to use keystone method. When more than one product is sold for one price, it is known as multiple pricing. Multiple pricing is greatly helpful during sales events and also help the retailers as the customers would want to buy the products in larger quantities. Reducing the price and offering discount in prices are commonly associated with retail trading.
Offering coupons and other promotional benefits are parts of discounting.lRebates and good seasonal prices are included in discounting. Goods that are priced lower than the cost are known as loss leaders. Such items do not fetch any profit for the retailers but they hope that the buyers will purchase the other products set at a higher price margin when they visit the shop.
upstream commerce. When you plan the best possible pricing for the retail business, you need to realize that the ideal strategy for pricing will be based on other aspects apart from costs. Good practices of pricing also have a role in the ideal pricing strategy. It is not easy to point out which aspect of pricing is more important. You must bear in mind that the consumer will want to pay the correct price for the products which will also help in retailer getting the profit.