How Are You Structuring Pricing to Protect Margins?

[sacredheart926]

For brick-and-mortar retail businesses, how are you structuring pricing to protect margins once you include product cost, shipping, and processing fees? Have you found a markup percentage that consistently works? Would love to hear some thoughts!

[DinaLRosenberg]

Hi there! 

We won't stock anything that is less than "keystone" - (doubling our money). However we are constantly on the look out for products we can take better numbers on. Some products are already labeled with MSRP so when we can, we shop markets. Most major wholesalers have markets around the big gift shows like NYNow & Atlanta- usually they'll offer 50% + 2 or 3%. That extra % is great for processing fees.

Re: shipping to you- you gotta do whatever you can to get free shipping. Check out the Faire online wholesale marketplace- they have many wholesalers that offer free shipping. 

If you can't find free freight-- you need to amortize that in (ie. 10 pieces cost $10 to ship- you add $1 to the wholesale price and then double it).

[homeprogreen]

Same pretty much. I run the numbers shooting for 67-68% if I don’t think I can get at least 60% on a fast turnaround then it’s not coming in the door 

[sacredheart926]

I have found the struggle of these manufactures selling directly to the public which then puts us in a tough spot. As well as tariffs that they are passing on to us.  

[ehflower]

Manufacturers selling directly to consumers have certainly become more common. On the surface, it seems like a smart move. But it also means they’re now handling all the service questions, expectations, and follow-up that small businesses have traditionally managed. Over time, they may find that working with individual consumers is more demanding than anticipated, and this shift could prove to be cyclical.

If manufacturers build additional margin into direct sales, it may only increase price shopping. Interestingly, I’ve often found that when products I carry are featured on Amazon or even sold directly by the manufacturer, they’re sometimes priced higher than what I offer in-store. In addition, lead times can be longer, customers may be required to purchase multiples, and shipping costs are often higher.

Dropshippers may serve as a bridge between manufacturers and consumers, but it’s an extremely competitive space with tight margins and operational headaches. As more questionable dropshipper sites appear and consumers experience poor service, the appeal of the lowest price may begin to fade. After all, the old saying still holds true — you get what you pay for.

[sacredheart926]

Being the only brick-and-mortar store in our area, I truly feel that customers appreciate having a place they can physically come into. People enjoy being able to see products in person, ask questions, and receive genuine, one-on-one customer service. It creates a more personal experience that you just can’t replicate online. We’ve found that many customers value the relationships and trust that come from being able to walk through the door and be taken care of face-to-face.

[DinaLRosenberg]

I agree.. customers want to interact- they want expertise and recommendations.. which we're happy to provide.

[DinaLRosenberg]

There are a couple of items we've paid tariffs on directly and we pass that cost onto our customer.

We sell a TON of books and we sell them MSRP. We always do what we can to get books on special and we never pay freight... 

Obviously Amazon sells books at a better price to us- but they don't have our expertise!

[doc_choc]

With the price of oil, we are seeing many of our suppliers now charging freight. Its a bit messy out there, with one thing or another, a tough one for all companies to navigate.

[sacredheart926]

That’s exactly what I tell people! We help our customers find exactly what they need, and we give them a true one-on-one experience—something big box stores honestly just can’t offer.

[ehflower]

We have been increasing our product line to Made in the U.S.A.  Fortunately, that is getting easier over the years and with the Country's 250th Birthday this year we feel it will be imperative to give these items rock star billing in the store and on line.  But we are running very tight on inventory, trying to focus on problem solving products.

Often we will ask a lot of questions and see if we can get more money for it's perceived value.

[sacredheart926]

I try my best to keep products that are made in the USA! 

[TCSlaguna]

We just have to increase prices if necessary. It's hard to navigate when things change daily. Having a good relationship with your vendors is always a plus. 

[JUYBoutique20]

When I first went into business, I followed Emily Benson and she always said never price your product for less than 64% margin.  There are some exceptions I'm sure, but I've always stuck with that when pricing.

[doc_choc]

To be honest we are just taking the hit on the margins at the moment, riding one storm after another, but at some point we will have to get our retail margin back up as its killing the wholesale margins. Our customers have a certain expectation of what our products should cost and it is difficult to be competitive with the mass market companies hammering down their prices to keep them inline with what they were 3-4 years ago. Reality is their strategy will most likely hurt them more long term the cogs is the cogs, shrinkflation and product specification changes to maintain margin and price point is not a good thing and you can't keep doing this forever! 

[AMPdUPNails]

I have add a 3% increase to all products to help cover cost.  I do offer a 3% discount for cash customers also.  I think this incentivizes customers and also helps cover some of my extra overhead.

[JoeTend]

We've consistently applied our desired margin (varies by category) to the flat product cost, then consider shipping fees/other fees. So, for most categories we often bump the price up above the calculated price to account for shipping fees (we don't add the fees at the beginning and then apply margin calcs because then we'd be making profit off the customer on the shipping and that doesn't feel good). I've found that using Faire for whatever I can order there is fantastic because with their Insider program, you get free shipping on many of their vendors (the program shakes up the participating vendors regularly). As a caveat to my first point, when we have very heavy things, adding the shipping fees to the price often makes the item way out of whack price-wise, so we do what we can. Protecting margin is the only way we can survive in a city like ours!

[sacredheart926]

Yes! and it’s become increasingly difficult. Wholesale margins that used to be about 50% are now closer to 30–40%, and retailers are often forced to compete with their own wholesalers who are selling directly to consumers.

[JoeTend]

I know this part isn't always easy, but if you are competing for margin dollars against the same vendors you purchase from, try finding new vendors! It's never good if they are selling for better prices than you are. BUT, also, do you think your customers are actually finding those better prices? I've noticed customers are OK with spending the $ with us because of the convenience. They're here, so they might as well just get it.

[JUYBoutique20]

What's the cost to join the insiders program?

[Fetched-Up]

I pay $19.99/month.