Review your prices

When was the last time you gave your prices a critical review? If you're scratching your head, you're not alone—many retailers often make a price and forget about reviewing it. However, regular price reviews are crucial for keeping your business healthy and profitable. Each card will frequently have different costs and pricing, which you must determine.

The Set-and-Forget Dilemma

It's a familiar story:

1. Set an initial price for an item
2. Get busy with day-to-day operations
3. Forget about that price for months (or even years!)
4. Now, they will wonder why their profits are shrinking

This approach can seriously harm your bottom line.

The Ever-Changing Retail Landscape

The fact is that now we are going through massive price changes. Prices now are in constant flux. Your retail prices should reflect these changes. Ignoring these shifts can lead to the following:

• Losing money on items where your costs have increased as failing to adjust prices can lead to a severe profit margin decline.
• Missing opportunities to boost profits on items
• Falling out of step with your competition and market trends

Your New Best Friend: The "Quantity On Hand and Price Check" Report

Here is a good report that I suggest you run "Quantity On Hand and Price Check".

This simple, powerful tool can kick off your price review journey. I think you will find this report a goldmine of information, showing you the following:

• Current stock levels (so you know what's actually on your shelves)
• Your cost price (what you paid for each item)
• Your selling price (what customers are paying)
• With your profit margins (the all-important difference) in this report, you do not need to calculate retail profit margin; it does it for you.

This information lets you quickly identify which items need your attention most urgently.

I took a client through this report, and she told me, "Clearly, I did set many prices and forget about them. Last year, I started reviewing monthly. I was shocked that some items were barely breaking even due to supplier price increases. Adjusting prices strategically boosted my profit by 15% without losing customers."

Pricing strategy

Yet, there's more to pricing than crunching numbers. Let's dive into some key factors to consider:

1. Customer perception: How do your prices compare? Are you a budget-friendly option or a premium retailer? Have you checked?

2. Product value: Does your price reflect the quality and benefits of the item? Sometimes, a higher price can boost sales by signalling higher quality.

3. Market trends: Are there seasonal factors or industry changes to consider? For example, some toys command a higher price in summer. There is an art in seasonal pricing for retail stores.

4. Your overall strategy: Are you aiming for high-volume sales with lower margins or fewer sales with higher margins? In my experience, getting enough sales to justify a lower margin is tough.

5. Consider location: Your shop's location can significantly impact your pricing strategy. If you're paying top dollar for a prime spot in the shopping centre, you must factor in the rent increases we see now, but remember that a prime location can also support premium pricing.

6. Salary increases: We are all now looking at salary and superannuation increases. You must factor in the rent increases we see now.

Here is an example of what happened to us: I negotiated an electricity discount with our supplier. I was told how much it would save us. It's been a year, and my electricity bills have not gone down, despite what I was told. 

How Often Should You Review?

In my experience, a general guide would be:

Tips for Effective Price Reviews

1. Set a schedule: Mark your calendar and stick to it. Consistency is key!
2. Use technology: Using your point-of-sale software.
3. When goods are received: Check your prices and use the history in your POS System to see if the change could impact your profit.
4. Listen to customers: Their feedback can provide valuable insights into perceived value.
5. Stay informed: Keep an eye on competitor pricing. The internet is great for doing that.
6. Consider bundle deals: Price reviews can help you identify opportunities for profitable product bundles, which is the best way to eliminate dead stock in my experience.
7. Psychology: Generally, instead of $10.00, use $9.99. Your customers will perceive the price ending in '.99' as lower. 

Promotional Strategies: Using Price Reviews to Boost Sales

Regular price reviews aren't just about adjusting your standard prices. They can also help you identify golden opportunities for promotions:

• Clearance sales: Spot slow-moving items that might benefit from a temporary price drop.
• Loss leaders: Identify products you can afford to discount heavily to drive foot traffic.
• Bundle deals: Create attractive bundles. In my experience, too many retailers do not bundle enough.

A Word of Caution

While it's essential to adjust prices when necessary, avoid making many changes at once. It's best to make a few here and then in some other spot, as doing so can alienate your customers. 

Wrapping Up: Your Action Plan for Price Review Success

Reviewing your prices regularly isn't just good business practice—it's essential for survival in today's fast-paced retail world. By staying on top of your pricing strategy, you ensure your business remains competitive, profitable, and aligned with market realities.

Here's a quick action plan to get you started:

1. Schedule your first comprehensive price review
2. Talk to your staff about gathering customer feedback on pricing.
3. Do competitor price tracking.

Your point-of-sale software has features that allow you to gain insights and make informed decisions. With regular reviews, you'll be well-positioned to thrive in the ever-changing retail landscape.

So, when will you schedule your following price review?