How Do I Set Retail and Wholesale Prices?

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How Do I Set Retail and Wholesale Prices?

One of the most difficult things about starting a new business is deciding how you will set your retail and wholesale prices. This can be tricky no matter what kind business you are planning on starting. Just remember that as a retailer your number one goal is to turn a profit. There are many factors that must be decided to this end. Setting the right prices for your products is perhaps one of the most important steps you can take to ensure a viable business future. Before you actually sit down and decide your pricing, it helps to understand the various different retail pricing strategies that most businesses use to determine their pricing. Here is a brief overview that can help you decide what types of pricing strategies are available to you.

First, it helps to determine the cost of the goods you will be offering consumers. The cost of goods can be described as the amount you paid for the product, plus the price of getting them shipped to you. Then you must also take into account the price of operating your business. Your account of your expenses should include a list of overhead costs, payroll, office supplies, marketing expenses, healthcare, and any other operating expenses. You should also take into account the current business market, the channels of distribution that you decide to us, and the competition you are up against. It is key to keep this in mind: no matter what pricing strategy you take or what price you sell your products at, your pricing must ultimately cover the costs of running your business, and of course, staying in business.

Here is a quick overview of common retail pricing strategies. Each strategy takes into account a specific set of circumstances. The first of these retail-pricing strategies is most commonly referred to as the mark-up cost. A mark-up on cost is accomplished by including a pre-determined profit margin to the cost of all of your merchandise. Mark-up is a retail pricing strategy that helps ensure that you will always make even a small profit. If you decide to employ the mark-up retail pricing strategy, make sure you include enough of a mark-up so that you cover all of your anticipated expenses and reductions. There is no one 'right' mark-up margin. How much you decide to mark-up depends on the kind of product line you are dealing with. Different products always deserve different mark-up margins.

Another common retail pricing strategy is known as keystoning. It is not as common as it once was, but it is still used by some retailers. Keystoning refers to doubling the cost your merchandise so that you sell your products at double the cost you paid for them. Of course, this almost nearly results in a tidy profit. However, the act of keystoning a product has become much less common than it used to. Increased competition is part of the reason, but it also has to do with the fact that many product lines simply don't allow the retailer to keystone. Many products come with a suggested retail price tag that simply does not give the retailer the freedom to keystone.

Speaking of suggested retail prices, this is another common pricing strategy that is used by many retail stores to avoid the problem of pricing wars. Suggested retail price also helps retailers maintain a stable profit level. It is a kind of no-fuss, no-muss way of dealing with pricing.

The other side of suggested retail pricing is competitive pricing. Competitive pricing simply refers to pricing your products at a price below your competitors. This strategy can work well, especially if you take the time to watch competitor prices carefully and design a special marketing plan that allows you to specialize in specific price specials that you can offer consumers.