One of the
most important questions any retailer must answer daily is about pricing your
merchandise. Is the price right? are you charging too much or too little for
your goods? Is it better to price high and drop gradually to find that sweet
spot or is it better to price aggressively to keep a steady volume of sales and
turn merchandise quick? The answer depends on you, your goals and your merchandise.
There is no right or wrong answer, your strategy is good if you are generating
a healthy profit. So what are the factors that you must consider when
determining your pricing? Here are a few
important points that you should consider:
- So what does It actually cost you?- ask yourself a question, the shoes
you are wearing right now what did you pay for them? Chances are, many of you
can remember the price down to the cent but now tell me what was the actual
cost to get them on your feet? Did you pay shipping charges? If not, how did
you get to the store to purchase them? did you drive or take a bus or a train?
What was the cost of getting to the store and back with your purchase? What we
are saying is that a lot of retailers particularly smaller independent retailers
will make the false assumption that their base cost is the price they paid for
their merchandise without factoring in any of the associated costs. What are
the costs that you need to factor in? obviously any shipping cost associated
with the merchandise but how about stuff like packing materials, seller fees
and employee costs have a full picture of the actual cost of your merchandise
before you start selling the items.
- Are you a tortoise or a hare– do you prefer to ship just a few
items per week but make a very healthy margin for those sales or do you like
fast and furious making a little on a lot of transactions basically are you a
tortoise or a hare? Tortoises price at the higher end of the price range for
the goods they specialize in, sacrificing volume sales to healthy margins this
method typically works well with premium high dollar items. More
of a hare? Pricing aggressively works well for low and median priced items
keeping margins tight will allow for more rapid turnover of merchandise steady
sales are always a big plus. If neither of these strategies works right for you
why not try a hybrid of them both?
- Understanding the market– Pricing depends a lot on where you
are selling your merchandise it’s important to monitor your pricing and this
can be tricky at times as marketplace
prices are constantly fluctuating but there are ways to do it. Ebay is a fairly easy one to check, you can
search current listings and see previous sales results for virtually any item
under advanced search settings. Amazon is a bit trickier to follow but sites
like camelcamelcamel.com can be used to track the sales trends on a particular
item and give you a better idea of how to price the item.
- Employ some psychology– ever wonder why prices so frequently
end in .99 or .95? it’s simple human psychology our minds register only the
numbers before the decimal place, so why leave money on the table by not making
your price end in .99 or .95? Another common perception is if the item is
priced too low the customer might assume it is
instead of lowering the price when an item does not sell maybe raise it and see
what happens; you will be surprised how frequently this works.
The right price unfortunately is a moving target but with a bit of patience and knowhow you can keep it in your sights at all times.