The right pricing strategy can make or break a shop's success. Have you ever considered dynamic pricing?

What is Dynamic Pricing?

Do you know how petrol prices change when you drive past the service station? That's dynamic pricing in action. It's all about tweaking your prices based on current events. That's dynamic pricing in action. It's all about tweaking your prices based on current events. Our POS system makes it dead easy to change prices on the fly.

It is all about being flexible

Real-World Applications

Here are some examples of what my clients do:

A Cafe

Let me illustrate a common scenario for a café owner. It's 2 p.m., and you've got sandwiches that will soon be binned. What do they do?

Here's what one of my clients does:

• Before 2 pm: Sandwiches sold at regular price
• After 2 pm: Offers a special deal on sandwich + coffee at a discounted rate

The result? Instead of binning unsold sandwiches with no margin, they turned potential zero into profit. It's a win-win: customers get a bargain, and the cafe boosts its afternoon sales.

A Hairdresser

• Morning Special: Discounted haircuts for seniors

This simple change increased foot traffic during slow hours and built loyalty among a key customer demographic.

Implementing Dynamic Pricing

You might think, "Sounds great, but isn't it a hassle to keep changing prices?" That's where modern POS systems come in. With the right software, price changes are a breeze.

The Power of POS

Here's how easy it can be:

1. Open your POS system
2. Navigate to the price change menu
3. Select the items you want to adjust
4. Enter the new price or discount
5. Set the time frame for the special
6. Hit apply

And voila! Your 'Happy Hour' special is ready to go.

The Benefits of Dynamic Pricing

From my experience, implementing dynamic pricing can lead to:

• Reduced waste: Sell perishable items before they expire
• Increased foot traffic: Attract customers during slow periods
• Higher overall profits: Maximise revenue by adjusting to demand
• Improved customer satisfaction: Offer value to price-sensitive customers

Tips for Success

Here are some lessons I've learned along the way:

1. Start small: Test dynamic pricing on a few items first
2. Communicate clearly: Make sure your staff and customers understand the specials
3. Analyse results: Use your POS data to see what works and what doesn't
4. Be flexible: Don't be afraid to adjust your strategy based on results

A Word of Caution

While dynamic pricing can be helpful, it's essential to use it properly.

FAQ: Dynamic Pricing in Australia

Q: What is dynamic pricing?

A: Dynamic pricing occurs when businesses adjust their prices based on current market demands, customer behaviour, and other factors. It involves changing prices in real time to maximize profits and stay competitive.

Q: What is an example of dynamic pricing?

A: One of the best-known examples is petrol pricing. Petrol stations adjust their prices based on time of day, traffic levels, and customer demand. During peak times or high-demand periods, prices can surge.

Q: Is dynamic pricing legal in Australia?

A: Yes, dynamic pricing is legal in Australia. The Australian Competition and Consumer Commission (ACCC) states that while forms of dynamic pricing exist in some markets, businesses must be clear about consumers' prices.

Q: Why is dynamic pricing considered good?

A: Dynamic pricing can be beneficial for several reasons:

1. It can increase revenue by maximizing the value of each sale.
2. It helps businesses grow market share by attracting more customers.
3. It gives businesses more control over their pricing strategy.
4. It can help prevent ticket scalping in event ticketing.

Q: Where is dynamic pricing commonly used in Australia?

A: In Australia, dynamic pricing is used in many businesses, including:

• Airlines
• Taxis services
• Hotels

Retail surcharging on public holidays sparks much debate. It's not for every business, but let's explore this complex issue.

What is a Public holiday surcharge?

A public holiday surcharge (retail surcharging) is an extra fee added to a customer's purchase to cover increased costs on the public holiday. It's gained more attention lately, especially on public holidays, with the astronomical growth of salaries.

Although it is commonly seen as an issue in hospitality and service industries, it does come into other sectors. For example, I recall a heated debate when newspaper companies introduced Sunday papers. Many newsagents argued that newspapers should have a consistent price daily, viewing them as products, and doubted customers would pay more because it was Sunday. Despite this pushback, the newspaper companies implemented a higher Sunday price. This higher cost is part of the reason Sunday newspapers sell less.

The Rationale Behind Public Holiday Surcharges

Cost of Labour

Businesses face significantly higher labour costs on public holidays. Today, the average hourly rate for a shop assistant in Australia is $30.38. You could look at 250% of the base rate for full-time and part-time employees at public holiday rates. Using this average hourly rate of $30.38, you can estimate that $30.38 x 250% = $75.95 an hour on public holidays.

It's a lot of money that can quickly eat into your profitability. This is why many shops close on public holidays. Many of my clients work themselves on those days; otherwise, it's not worth it to open.

The Balancing Act

Implementing a surcharge is about more than covering costs. It's about finding a delicate balance between:

• Staying open to serve customers

• Covering increased operational expenses

• Maintaining profitability

• Not upsetting customers

The Nuts and Bolts of Surcharging

Surcharge Rates: Finding the Sweet Spot

In my experience, most businesses charging surcharges use 10% to 15%. If you levy 10%, you might as well go to 12.5%. If you will make it 15%, I suggest considering 17.5%.

Although I have seen it, I think 20% to 25% is too high for most customers.

Retail surcharge laws

I am unaware of any legal limit on surcharge percentages in Australia. However, businesses must display the surcharge, e.g., at the point of sale, as they must disclose prices, including surcharges.

Besides, it's critical to maintaining customer trust.

Industry Variations: Who's Surcharging and Who's Not

Where You'll See Surcharges

Surcharges are most common in the hospitality sector. Restaurants and cafes often lead the charge due to high labour costs and the expectation of being open on holidays.

Where You Won't See it.

You're unlikely to see surcharges in many other sectors, including:

• Essential services

• Public transportation

• Online services

• Banks

• Government services

The Customer Perspective: What's the Verdict?

In my interactions with my clients, they have reported to the public a range of reactions to surcharges:

• Some flatly refuse to pay it.

• Many accept the necessity, especially if the surcharge is reasonable.

The Role of Technology: How POS Systems Can Help

As someone now in the POS software business, I can't stress enough how important the right technology is in managing surcharges effectively. Our POS System has a function that allows you to charge the surcharge.

In the cash register

You can make the surcharge here as a percentage or amount; it is your call.

As it automatically calculates, it reduces the chance of human error, so you can change any figure you like, e.g., 12.5%, which is hard to do manually. More about 12.5% later.

• Display surcharges on receipts and customer-facing screens

• Provide reports on surcharge revenue to help with decision-making

• Offer flexible options for implementing different surcharge strategies so you can do what we call an A/B strategy, say, charge 10% this public holiday and 15% on the next and then compare the results.

Note:

-If you have a customer who objects too much to the surcharge, you can choose not to charge them for this transaction.

Clear Customer Display

Our POS systems with customer-facing displays will clearly show enhanced transparency.

Detailed Reporting

Our advanced reporting features can help businesses analyse the impact of surcharges on sales and customer behaviour.

Conclusion: Finding Your Balance

As retailers, we need to balance our operational costs with customer satisfaction. My advice? Whatever approach you choose:

1. Be transparent

2. Be fair

3. Always prioritise your customers' experience

FAQ

Q: Can businesses charge a public holiday surcharge?

A: In Australia, you can legally charge a public holiday surcharge.

Q: What is the average public holiday surcharge in Australia?

A: The most common range for public holiday surcharges is 10% to 15%

Q: What is the public holiday rate in retail Australia?

A: Public holiday penalty rates for retail employees are typically 225% to 250% of their base hourly rate.

Q: Can you charge a weekend surcharge?

A: Yes, you charge weekend surcharges.

Q: Why do businesses implement surcharges?

A: Generally, businesses implement surcharges to offset increased costs, notably higher labour costs due to penalty rates on public holidays and weekends.

Q: Consumer rights regarding surcharges?

A: Consumers have the right to be informed about surcharges before purchasing, so businesses must display surcharge information.

Q: Alternatives to surcharging for businesses:

A: Not many.

• Absorbing the additional costs

• Raising regular prices to account for occasional higher costs

• Closing the shop

Note: I am not a lawyer, so you may consider getting proper legal advice before proceeding.

The recent legal action by the ACCC against Coles and Woolworths is a shocker. Focusing on allegedly misleading discount campaigns will bring retail pricing strategies under intense scrutiny.

What's at Stake in the ACCC vs. Supermarket Giants Case?

At the heart of this legal battle are the "Prices Dropped" and "Down Down" campaigns run by Woolworths and Coles, respectively. The ACCC contends that these promotions were misleading due to artificial price inflation before the discounts. 

Read what they are saying about one item here.

Now, in total, the ACCC is taking to the Federal Court:  

• Woolworths: For 266 products affected over 20 months
• Coles: For 245 products affected over 15 months

The outcome of this lawsuit could have far-reaching implications on our pricing strategies, especially in our current never-ending inflationary environment.

The Numbers

These aren't small numbers; the potential penalties are significant, $50 million for each breach. That should be enough to make any retailer take notice.

A Common Scenario

Imagine this scenario: You've been selling an item for $6 for a while. Your supplier increases their price to $5, so you bump your selling price to $10. Then, a week later, you decide to run a 20% "discount" promotion, bringing the price down to $8. In retail, this is relatively common.

Based on what the ACCC is saying, your initial pricing and cost-based increase are standard practices, so that is okay here, but that "discount" promotion could land you in hot water. Why? Because your discounted price of $8 is higher than your original long-term price of $6. A week is hardly a reasonable period.

The Grey Area

The tricky part is determining a reasonable period before offering a discount.

"What if you offer a discount three weeks after increasing the price, a month, a few months, etc? Would that be misleading or fair?" The law needs to be more transparent on this, which leaves us retailers with a problem of what is reasonable.

My Two Cents

Based on my years of experience, it's best to err on caution. If you've just had a significant price increase, think twice before slapping a discount label if the final price is still above your long-term price point. Your POS System shows a history of when you sold an item and for how much. It will also inform you how long the new price has been in effect. I will also supply you with many of the records you may need.

Let's tweak our scenario a bit more:

1. Original cost: $3
2. Original selling price: $6
3. New cost: $3.50
4. New selling price: $7
5. 20% discount price: $5.60

In this case, your discounted price ($5.60) is below your long-term price ($6), so it will likely be okay.

The Bigger Picture

This case against Coles and Woolworths isn't just about big supermarkets. We must be more mindful of how we present our pricing and promotions to customers.

A Wish for the Future

Would it be great if suppliers informed us about price increases? This would allow us to prepare and communicate proactively with our customers, but we can discuss that in another post.

In the meantime, please ensure that your pricing practices comply with the current legal standards and keep our customer's trust. After all, that's what good retailing is all about.

Many businesses often accidentally sell below cost in a tale as old as retail. This is a ticking time bomb for many retailers, particularly in today's world, where margins are razor-thin; understanding the actual cost of your products is required to survive. We had a software user who, until she implemented our Point of Sale (POS) system, did not realise she'd been selling a popular item at a loss for months. Her story isn't unique, but her turnaround is. Let's dive into how to avoid this common pitfall and how to use technology to stop this happening.

The Peril of Pricing Below Cost

Selling below cost quickly boosts sales, but it's a dangerous game as these loss leaders can easily backfire. Here's why:

• Eroding Profits: Every sale becomes a loss, slowly draining your business.
• Setting Unsustainable Expectations: It can only last so long, and you risk losing your customer base once prices increase. Customers who buy as you are cheap do not stay when your prices get real.

How it happens

Many retailers can miss the full impact of pricing below cost because there are many more factors than their purchase price. Consider:

1. Shipping and handling costs
2. Storage expenses
3. Staff wages for handling and selling the product
4. Marketing and promotional costs

When you factor in these hidden expenses, that price might cost you more than you think.

Get Pricing alerts

Our Point of sale software can be set up to issue a special warning if the price of a stock item being scanned is under cost. This warns people scanning that item at the cash register that something is wrong and needs to be checked.

If you feel that you may have a problem here or you want to check if you are selling too many items at huge discounts, I suggest you run the following report. 
 

Press transaction enquiry, as highlighted in red. Now select the relevant options. It is actually a good idea to do it once and then do it again with different departments that appear and check out the results.

How POS Software Can Be Your Pricing Guardian

Our modern POS systems are more than just fancy cash registers. It is your first line of defence against pricing errors and a powerful tool for retail pricing strategy. Here's how:

1. Real-time Cost Tracking: Keep tabs on your actual costs.
2. Automatic Pricing Alerts: Set warnings for items sold below cost or at low margins.
3. Detailed Profit Margin Reports: Analyse which products are your profit heroes and which are the villains.
4. Set Minimum Margins: Establish a floor for your profit margins and stick to it.
5. Regular Audits: Use our POS reports to review pricing regularly.
6. Smart Discounting: When you offer discounts, ensure they're strategic and profitable.

FAQ: Common Pricing and Inventory Issues

Q: How can I quickly identify products that are selling below cost?
A: A sound POS system will allow you to set up automatic alerts for items selling below a certain margin threshold. You can also run regular reports to identify low-margin products

Q: How often should I review my pricing strategy?
A: Conduct a thorough review monthly at a minimum.

Conclusion: Technology as Your Profit Partner

In today's retail landscape, selling below cost isn't just an occasional mistake—it can be a business-ending blunder. But with our POS software and a keen eye on your numbers, you can turn potential losses into consistent profits. What we have is a powerful tool for making informed decisions about your pricing strategy. 
 

Bad pricing can be a death sentence in retail. It would be best to have the right pricing strategy to operate in this ultra-competitive landscape. Here is the game-changing solution to help you achieve that.

The Pricing Predicament: Challenges Galore

• Customers question your prices, leaving you scrambling for justifications.
• Suppliers are inquiring about your price, and you're unsure how to respond transparently.
• Endless hours spent analyzing historical pricing data to determine what works for you.

We've developed a cutting-edge solution that puts you back in control of your pricing strategy.

Introducing the Game-Changing Pricing Tool

Our innovative Point of Sale (POS) software boasts a revolutionary "Price Change" feature that revolutionizes pricing management. With just a click, you gain access to:

• A comprehensive pricing history for every product
• Effortless cost and retail price comparison (displayed in red and blue)
• Historical data to inform your pricing strategy

This will set you apart from the competition.

How to use this price-changing tool

You will find a Price Change screen in green above in the stock item. 

Now when you click that, you get another screen with the cost price shown in red and see the blue arrow, you have your retail price. 

Now, you have a complete history of the costs and retail prices and can sort by date. This can help you determine your retail pricing strategy and the right product price.

With just this click, you gain access to:

• A comprehensive pricing history for every product
• Effortless cost and retail price comparison (displayed in red and blue)
• Historical data to inform your pricing strategy

In my experience, the process is quick to do. Also, what I find very useful is assessing the price vs. sales. There is no point selling too cheap if you can get more.

Elevate Your Retail Success to New Heights

Don't let pricing hold your business back any longer. Take control of your pricing strategy today and unlock a new level of retail success. Your business's future is in your hands.

Studies have shown that if you reduce a price, you are better off using a price-off amount rather than a percentage-off. So **price-off discounts beat percentage discounts for driving sales in retail.** I know this may seem counterintuitive, but stick with me here. I'll explain why opting for a concrete dollar over a vague percentage is the more intelligent move for your brick-and-mortar shop.

First off, percentage discounts don't speak to customers. Sure, 10% off sounds impressive in theory. But without a calculator, how many folks can instantly compute the actual savings in their heads? Not many! And even if they can do the math, that extra mental effort creates a barrier. 

Consider this: Instead of announcing a price reduction of 10% on a $10 item, you are better off announcing a price reduction of $1. 

In both cases, the price was reduced from $10.00 to $9.00, but the $1 is real, and 10% is not. 

Now we're talking. **Customers get that - no fuzzy math is required.** A concrete dollar amount is both real and motivating. It's an instant win rather than a puzzle to solve. With a set dollar amount, the deal clicks. No, memorizing the original price, no multiplying - just a straightforward new lower price. 

Okay, you're convinced that price-off discounts are the way to go. But how do you set them up in your point-of-sale system? Don't sweat it - it's a piece of cake:

1. Tap the "Discounts" icon on the main screen (see red arrow in diagram above).
2. Select the "Price-Off" option.
3. Punch in the dollar amount, like $7.
4. Choose which products get the savings. 
5. Hit "Save" and you're done!

Your customers can get communicated, math-free discounts. 

Here is how you can do this at the point of sale. See the diagram above where the red arrow points. This discount can be set up to be preset, so it is one button handling.

Note that if you mucked it up by changing the prices and want to start again, press the F7 button.