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Anyone can give it away PDF Print E-mail
Written by Alixe MacRae   

Image"Anyone can give it away" is a phrase from my formative years in retail. I've worked for some great stores managers, but the one who repeated this mantra was surely the best. He knew what determined what the ‘right price' was - in any given circumstance.

Here are some of the factors that need to be considered when setting the ‘right price' - whether it's a chocolate bar, a hand-finished dining room suite or a high-end appliance group.

Complete landed cost: this includes first cost plus all transportation charges, applicable duty, the exchange rate, unrecoverable taxes as well as the cost of doing business - otherwise known as ‘SG and A' (selling, general and administrative expenses). For many retailers, SG and A could often be over 29% of the eventual selling price. Many the low-cost-providers operate at less than 20% - but the average independent furniture, mattress and appliance store isn't Wal-Mart.

A simple form that will force the merchant to consider all of the necessary variables can be easily designed. (Sears used one over 20 years ago).

Competition: for those foolish enough to believe increasing market share is the definition of success. The number of units sold can drive any well meaning retailer into bankruptcy. An accountant of my acquaintance has the perfect motto to cover situations such as this: "It's not what you make; it's what you keep." If a sale doesn't enrich the bottom line; don't sell.

This doesn't mean you ignore other retailers; it means you must keep finding more and better ways of being different. This can include: flooring exclusive product; providing wanted services; longer store hours; a better guarantee; tutorials (something Mac devotees love about the Apple store - hey, how about hosting design/decorating workshops in your store!) or cachet. The president of Rolex once stated in an interview he wasn't in the watch business, he was in the luxury business.

Timing: Christmas is different from February. At one time I wanted to sell an item at Christmas at $2.99 (cost $1). My role model store manager suggested $7.99. I argued that last February I couldn't sell them for $5.99. But I wisely took his advice, and sold them all in three days (maybe they should have been $9.99). Understand product cycles, and price accordingly.

Perceived value: this has absolutely nothing to do with cost. Take two of the same silver ring. Put one in a Tiffany box and another in a Costco box. Now ask a random sample of your customers what she is prepared to pay for the ring. When she gives a higher price for the Tiffany box, it's time to start figuring how you can increase the perceived value of the product on your floor.

Try to find out what other products are made in the same factory as you may get what is called the ‘halo effect' (for example, is the Liz Claiborne line made there?). Don't dress down the product. Don't be afraid to make it look fabulous. Be sure to list all of the features that your customers associate with luxury and comfort on the point-of-purchase material (solid wood, hand-carved, hand-finished, high grade Italian leather, silk and wool ticking, etc.).

Exclusivity: if others don't have it, you can better control the price. When it comes to furniture and furnishings, nothing is completely exclusive - there is always an alternative the consumer is willing to accept, so don't get too greedy. Simply add a reasonable premium for your wise buying.

Remember the Internet can make you look foolish and according to reputable studies eight out of ten Canadian consumers look at furniture and appliances online before they step into their first brick and mortar store.

Multiple pricing: buy two and get 25% off. Your average ticket jumps, while the expenses incurred to fulfill that sale fall. Do you offer the customer get a better price when she buys the complete bedroom set, instead of just the headboard, foot board and night stands? Can you add high mark-up accessories to the television rather than slashing the price?

Rogers Media may be the "bundle king" when it comes to home telephone, cable and Internet service - but it's a great example of how ‘bundling' adds to the bottom line.

Owners and managers must hold buyers responsible for maintaining their mark-up (or gross margin) goals - even if it's themselves they are holding to account. Performance without goals is possible, but not likely. There is no place in today's economy for "get a hunch, buy a bunch" planning.

Remember, it's the luxury business that is growing in today's economy, whether the discussion is about condos (believe it or not, one sold in Toronto recently for $28 million), cars, coffee or clothing. Price to thrive, not just survive!

A regular contributor to Home Goods Online, Alixe MacRae is one of this country's best known merchandisers, having held senior positions at a variety of well-known Canadian retailers including Stoney Creek Furniture, Sears Canada and The Bay. She recently started her own business Concierge Relocation ( Her company specializes in move management, especially for those dramatically downsizing seniors and their overwhelmed children.

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