Has the “retail price” lost its credibility? How does one define “retail price,” let alone validate its legitimacy? Seemingly, we are living in a world of phony prices where the retail price is very distorted.
Of late, I have seen the following examples of retail pricing:
- Buy 1 shirt at regular price and get the second one at half price
- Buy 1 suit at the regular price and get 3 shirts and 2 ties absolutely free
- Buy a travel water bottle at $9.99 and get a 20 oz. Coke for free
- Buy any fishing reel and get free line, free spooling and 20% off any fishing rod
- Selected fishing rods, your choice half price
- Order this item today, and we will double the order at no additional charge
- Order online today and we will send you these accessories absolutely free…a $25 value
- Buy any three ____ and we will give you the fourth and fifth items absolutely free
In these examples, what is the true retail price and what should the customer legitimately pay for the item(s)? This razzle-dazzle pricing is designed to impart a sense of purchase urgency as well as “suggest” considerable savings are at hand. Thus, in many instances, the retail price has become simply a platform from which someone discounts or suggests great value by including other items or services for free.
For many categories of merchandise, the consumers are confused over what specific items cost or should cost. As a result, given all the hoopla and misrepresentation, the consumers are responding to the deal of the day versus the valid price of the products.
Why should you care about this form of pricing creeping into the market? You should care because this form of pricing is conditioning the customers to expect some form of exceptional deal (real or imagined) to warrant their consumption.
Secondarily, as your competition moves in this direction, their pricing bravado will gain a larger share of the market at your expense. You may sell the same product at the same price, but to the consumer the other guy is offering a better deal.
This is not a universal problem but occurs frequently with soft goods, footwear, higher-priced hard goods and highly-competitive merchandise groups. Usually basic items like light bulbs, safety pins, fresh produce, sinkers, hooks, lures and camping accessories are not, as of this point, subjected to the “deal of the day pricing.”
On the other hand what started as a trickle a decade ago has become a torrent of pumped up list prices, abused “regular prices,” hefty discounts and free ancillary items…all of which is designed to camouflage the ultimate price paid and to augment the “buy now” attraction.
To believe that as a tackle retailer you are not affected by this kind of pricing would be naive. Steadily, the big box stores, the larger chains, the big independent retailers will sufficiently condition the customers to expect a “deal” such that your business will decrease and theirs increase.
My counsel to you is..if you can’t beat them, then join them!
Start by selecting items you wish to promote; these should be items of higher value. Next, establish a much higher retail price in the range of 55% to 70% markup. You can do this by working with vendors to pre-price the selected items at a price you determine, work with a vendor to obtain free goods, direct-import the item(s), purchase through a buying group, purchase a makeup item or lastly, buy a good closeout item.
In any case, when there is sufficient spread between cost and retail price, you can begin to promote with discounts, free merchandise and other forms of “hot deal pricing.” It’s now the way of the world and it does work. The secret of course is to select items for promotion which have broad consumer appeal and that you can purchase with sufficient margin so as to support highly-attractive consumer offerings.
There are three main keys to this form of promotional success: (1) select items which have strong demand, (2) work closely with strategic vendors and to build and label items to promote and (3) choose items which you can purchase in bulk.
So dip your toe in the pool of razzle-dazzle pricing; you may like the temperature and the sales results!
*This story originally appeared in Fishing Tackle Retailer Magazine, December 2013 which you can read here.