[dropcap cap=WE]all know that airlines charge a slew of prices for what is essentially the same product. This is not unlike the price of long-stem red roses, which escalates as Valentine’s Day draws near. How do airlines and florists get away with it? Better yet, what if jewelers could do the same?[/dropcap]
With a change in pricing philosophy, you can.
APPROACHES TO PRICING
There are two ways to approach your pricing: the cost-up approach, which starts with costs and works upward; and the supply/demand strategy, which takes into account an item’s popularity.
In the cost-up method, you add your material and service costs, overheads, etc. and tag on a standard profit margin desired for each of the items to arrive at their prices. So if two similar bracelets are made by the same vendor at the same cost, they will be priced the same, even if one sells 10 times more.
But what about supply/demand? Here, the price fluctuates according to market forces. If an item flies off the shelf, it is priced higher than an unpopular item.
How do you price jewelry using supply and demand? Start with how the buying public perceives your jewelry pieces as opposed to what they cost you to get them into your showcases.
Go through your top sellers with a fine-tooth comb. If they flew off the shelves at $280, wouldn’t it make sense to offer the next consignment at $299? You can always bring it back down in a month or Get the Biggest Bang for Your Retail Price so if it doesn’t work. Unless you try, you will never know. Even at a $20 premium on 20 percent of the product lines (or say 500 bestsellers) at your store, you would make $10,000, and that’s based on only one stock turn per year. In fact, the industry average for top sellers is 3 to 4 turns a year. Do the math, and you may be taking home an extra $40,000 in profit. Not all items are created equal, and while some may fetch good premiums, others will fall by the wayside. But, if you work at finetuning it, the extra profit generated by those that sell repeatedly at the higher price will more than compensate for those that did not do so well.
The best place to start is with your big-ticket items. Why? It makes for a smaller test bed as there are fewer items but more dollars available and you can easily monitor and fine-tune.
Your customers will let you know when you have reached your top price on an item when sales dry up. Don’t worry: The extra profit from the successful price increases will offset any short-term loss of business on those that aren’t.
Unless you are a psychic, there’s no knowing exactly what a customer is willing to pay for an item. But, with trial and error, you’re almost guaranteed to get around that challenge.
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Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA