Without a doubt, these continue to be unprecedented times for managing a retail business. The Disruption with a capital D continues, from the pandemic to supply chain challenges, employee issues, worldwide inflation, interest rate increases, etc. And now, the global economy is in more turmoil due to the Ukraine invasion and the resulting sanctions against Russia.
Lots of challenges for business owners as they wrestle with rising costs, aren't there?
But for independent retailers, there exists one glorious opportunity: price elasticity. Yes, raising prices. A whole new ball game for many independent retailers.
- Worldwide prices are going up (you've noticed that, right?) But in general, customers don't seem to mind. They're spending like mad!
- Think of all price changes as an experiment. Test out new prices on some items. You will know soon enough whether the customers will pay. If not, take a markdown and move on. (Just don't talk yourself out of them in advance. And by all means, do not ask any staff members, "Would you pay $X for this?")
- In every retail environment, some merchandise has a higher "value" for the customer than other merchandise. Maybe it's the brand name, or maybe it's rare, or maybe it's just hot right now. Whatever, consider bumping up the price. Soon!
- Merchants know that what they paid for goods is always subordinated to what they can get for those goods. The axiom "Price is not a function of cost" must rule!
- Use your judgment! An across the board percentage price increase may be easy for your computer to do. Such actions are tantamount to failure; pushback and even resentments are sure to follow. Avoid the quick and easy solutions.
- Yes, extra markups are the opportunity. But they demand careful selection and timing. They are best applied to new merchandise when it arrives.
- "Service fees" can be low hanging fruit for increasing revenue. You do special orders for customers? Alterations? In-home installations? All of those things are delivering value for the customer, and should be compensated.
This is an incomplete list, to be sure. We hope it prompts some imaginative thinking on your part.
A savvy response to these business challenges is possible. The crises of these times mean you can be much more strategic in your pricing and merchandising.
Price elasticity? Unleash your merchant instincts!