Some retailers look at their pricing strategies biannually, some annually and some never but the truth is it should be looked at on receiving every single invoice – yes, every single invoice.
Not only can wholesale prices change without notice and freight charges change without notice, but your fixed and variable business costs can change, perhaps without YOU noticing. That’s why pricing strategies should be reviewed so often.
When calculating a retail price for your stock do you take into consideration, for example,
- Freight (inwards and perhaps even outwards if you sell online).
- Fixed costs such as rent or rates.
- Variable costs such as wages (staff and your own), electricity, phone.
Do you know how much each item actually costs you?
When chatting to various clients about pricing strategies, it’s clear that so many of us in retail, make pricing decisions based on emotions – based on whether they THINK their customers would pay that amount or not. I know the thought when in retail myself, it’s how we based our prices for longer than I would care to admit.
But at the end of the day, the products sold need to ensure you are meeting your financial goals and continuously growing your business. For us, this wasn’t happening. Basing our prices on the assumption that we knew what our customers would pay for the item meant we were not only losing money but failing to meet financial targets and ultimately heading down a rocky road of survival.
Lucky for us we changed our mindset, reviewed our pricing strategy and started selling things for their true cost plus the margin required to be profitable and sustainable.
But with 46 small businesses in Australia closing their doors every day (and this stat was pre-pandemic) many businesses are not as lucky as we were – they didn’t review their prices, they continued making emotional pricing decisions, which may have ultimately contributed to their failure in business.
I urge you to take some time this week to:
- Review your prices.
- Compare old and new supplier invoices.
- Sit down and work out your fixed and variable costs.
- Make sure you are adding GST and inward/outward freight to each item, over and above your normal mark up.
It seems so simple, but unfortunately, it’s not. It takes time, effort and energy and perhaps a community to help you with the ebbs and flows of business and pricing.