Retail Pricing
strategy,
in some industries, has a great deal of impact on sales volume. Once customers are
familiar with a product and know what they want, they often tend to buy for price. When
this is the case, it is necessary to run sales frequently and to advertise them, so that
customers know your store is a good place to frequent if they want to save money. In this
environment, all prices have to be watched carefully with those of competitors. In other
businesses, pricing is less sensitive and normal markup can be figured on most products.
It is often possible to attract more customers to your retail store and sell more merchandise
if your pricing strategy on some items are somewhat lower than those of your competitors. For other
merchandise, especially that which is less competitive and more unique to your store, you
may have to set a higher selling price, since you may not get the volume of sales you need
in order to make a good profit. In trying to decide on a price, it is useful to experiment
first with different prices.
For example, if you are selling 75 units per week at $1.60 gross profit per unit, your
total weekly profit is $120. This is the equivalent of selling 100 units at $1.20 each.
In this example then, a retailer may offer a product for sale at a $0.40 savings to the
consumer but still earn the same weekly gross profit if he or she is able to sell only 25
more units at the lower price.
On The Job Activity
In your own business, select one or two products and post a "sale" price in
the window or on the item. Reduce your profit by about 1/4 and keep that lower price for
at least one month. Then check whether your total profit was higher than previously at the
old price for the same time period.
If possible, discuss your thoughts with a person knowledgeable in the area of
merchandise management; determine other experiments in pricing which may be worthwhile in
your particular situation.
