What you charge for what you sell needs to be carefully considered. Price is all about customer perception of value. Value is based in a range of criteria including:
- Added value – from purchasing from this business.
- Perceived value – how you package a product compared to how others package the same product can lead to a different price.
a. Manage labour to focus on products with the best return to the business. This is a balance between overall gross profit dollars and margin percentage.
b. Look at items with a customer service component, where your expertise is required to make the sale or make good use of the products or where there is a reasonable after sales service component. These can usually carry a higher margin.
c. Look at the items which are unique to your business in your location or nearby. If you are the only store serving the local community then you do have a pricing opportunity. These items can usually carry a higher margin.
d. Assess why people shop at your shop. If they are shopping because of convenience then you have the capacity to charge more for this. This is why convenience stores charge more for items which you can buy elsewhere for considerably less.
f. Involve others in setting sale price. Ask your team what you can charge for an item. Assess what they think you can “get away with”. By polling team members, you may find that your perception on price is lower than what others expect.
You can build a stronger business by taking small steps each day which focus on new traffic, better margin and improved sales efficiency. No grand plan, no expert strategy – just small steps which leverage opportunities which exist in your retail business.
By paying closer attention to the margin you can achieve, you strengthen the financial foundation of the business and ensure that your return on inventory investment is more helpful to the bigger business plan.