HOW TO PRICE STOCK ITEMS IN YOUR NEWSXPRESS BUSINESS FOR SUCCESS

Pricing items it crucial to the profitability of your business. The right price is one that ensures you sell a product efficiently (quickly) at the best possible margin. The wrong price can make sales slower and or deliver an inadequate margin to cover your real costs.

Discounting from the get-go sends the wrong message, in our opinion.

The right price is all about shopper perception of value of an item for the price being asked. Perception will differ by location and the nature of the business itself. The less your business looks like a traditional newsagency the further you will be able to go in terms of how you price the goods you sell over which you have control of pricing.

There is no one size fits all rule for pricing. If you ask a colleague in another retail business for their pricing, be aware of the differences between your two businesses. Take these differences into account when considering your position.

Our advice is that you do not ask other newsXpress members what to price something at until you have followed the advice here.

Factors to take into account when pricing items include:

1. Can you package the item(s) such that price comparison is difficult. 
2. While other retailers nearby have this item?
3. How urgently will people want the item? Will they wait for a cheaper price elsewhere?
4. Am I running a loyalty program that can offer a discount? If so, this ought to be reflected in your pricing.
5. Can I bundle the item with other items, not more of this item, and make it even harder to price compare?
6. What stock turn do I want? If turn is vital, a lower price may be more appropriate whereas if margin is the focus, a higher price could be more appropriate.
7. Who buys the item? This can help you consider how price conscious the purchaser may be.
8. Is this a once off purchase or part of a collection?
9. Is it an impulse purchase item?
10. Is the item likely to be put on LayBy? If so, this is a cost to your business and ought to be reflected in the price.

What you charge for an item is up to you and your local circumstances. If you do ask for advice, be sure to understand the circumstances of those offering advice.

How to be a barrier to price comparison with other retailers:

1. Add extra service value.
2. Display the product differently.
3. Bundle with other products.
4. Offer multi-buy pricing.
5. Offer a different shopping experience.

Here is important advice from the ACCC about resale price maintenance:

It is illegal for suppliers to:

• put pressure on businesses to charge their recommended retail price or any other set price, for example by threatening to stop supplying to the reseller
• stop resellers from advertising, displaying or selling goods from the supplier below a specified price.

It is also illegal for resellers to ask their suppliers to use recommended price lists to stop competitors from discounting. In most cases, a supplier may specify a maximum price for retail.

The ACCC offers this advice on recommended price lists:

There is nothing wrong with using a supplier’s recommended resale price (RRP) list so long as it is just that—recommended. However, it would be illegal for the supplier to put pressure on you to charge the listed prices or any other set price (for example, RRP less 10 per cent).

On the other hand, don’t be tempted to ask your supplier to use its price list to stop your competitors from discounting. You and the supplier who agrees with your suggestion would then be breaking the law - inducing resale price maintenance or a price fix 

This advice from the ACCC can be found at www.accc.gov.au.

Bottom line: pricing is up to you. It is a right that as a retailer you must exercise with care and thoughtfulness. It is equally important that you monitor your decisions and change them if time shows that you have made a mistake. Remember, it is easier to reduce the price of an item than it is to increase the price.

Some valuable insights when you are thinking about price…

The power of the number 9.

In his book Priceless, William Poundstone analyses  8 different studies on the use of charm prices (pricing that ends in a 9 or a 5 but usually a 9), and found that, on average, they increased sales by 24% versus their nearby, ’rounded’ price points.

Poundstone has a video which explains this. It’s worth watching and can be found via this link: http://youtu.be/nZqOGhWw3Q8.

For a more complete study on pricing, read The Widespread Use of Odd Pricing in the Retail Sector by Judith Holdershaw, Philip Gendall and Ron Garland. Published in 1997 in Marketing Bulletin. http://marketing-bulletin.massey.ac.nz/V8/MB_V8_N1_Holdershaw.pdf

What to include in your calculation.

Start with the real cost price. This should be regular wholesale plus freight. Keep any newsXpress or other discount as a bonus for yourself. Add freight as it is a cost associated with your location. This is not yours to soak up.

Setting your price.

In considering what to sell something for, ask your colleagues in-store how much would you pay for this? Do your research, too and see what others nearby sell the item for. Finally, consider carefully your objectives for the product – is this a volume play or a margin play?

Your pricing choice may not be as clear-cut as it would seem. For example, you could set a high price knowing that with a discount voucher on purchase the item appears to cost less. You might have volume pricing: $xx.xx for one, $yy.yy for two. You could have the item bundled with another to differentiate your offer to that of a nearby competitor and thereby offering you the opportunity to break free on pricing.

Think carefully about where in a band you price an item. For example, Items priced above $7.99 could probably sell at $9.99. Items above $19.99 should either be $24.99 or $29.99 and no other number in between. Above $29.99 more often you should target $39.99. 

Avoid nothing prices that can cost GP. For example: $21.95 should be $24.99; $112.50 à $119.99; $6.50 à $7.99; $8.75 à $9.99; $132.50 à$139.99; $36.50 à $39.99..

Choose to go to a higher price point rather than lower. Independent retail businesses, newsagencies especially, are expected to be more expensive. If you counter this with a consistently offered and generous discount voucher program then erring on the higher side of pricing works for you as your voucher sets value perception for your shoppers.

Our recommendation is that you always end your prices with a .99 and price at above RRP.

Be bold on price, make more money and make your business more valuable.