How can you price your merchandise competitively without sacrificing quality?

1 Know your costs

The first step to pricing your merchandise is to know your costs. This includes not only the cost of goods sold (COGS), which is the amount you pay to acquire or produce your products, but also the overhead costs, such as rent, utilities, marketing, and labor. You need to calculate your break-even point, which is the minimum price you need to cover your costs, and your target margin, which is the percentage of profit you want to earn on each sale. Knowing your costs will help you set a realistic and profitable price range for your merchandise.

3 Know your competitors

The third step to pricing your merchandise is to know your competitors. You need to monitor and analyze the prices, quality, and assortment of your direct and indirect competitors in your market. You can use tools such as price tracking software, web scraping, or mystery shopping to collect and compare data. You can also use techniques such as competitive pricing, which is setting your price based on the market average or the prices of your closest competitors, or differential pricing, which is setting your price higher or lower than your competitors based on your unique value proposition and positioning.

4 Know your goals

The fourth step to pricing your merchandise is to know your goals. You need to have clear and measurable objectives for your pricing strategy, such as increasing sales volume, revenue, or profit, or enhancing customer loyalty, satisfaction, or retention. You also need to align your pricing strategy with your overall business strategy, such as cost leadership, differentiation, or focus. You can use techniques such as dynamic pricing, which is adjusting your price according to changes in demand, supply, or competition, or promotional pricing, which is offering discounts, coupons, or incentives to stimulate sales or clear inventory.

5 Know your results

The fifth step to pricing your merchandise is to know your results. You need to track and evaluate the performance and impact of your pricing strategy on your key performance indicators (KPIs), such as sales volume, revenue, profit, margin, conversion rate, or customer lifetime value. You also need to test and optimize your pricing strategy based on the feedback and behavior of your customers and competitors. You can use techniques such as A/B testing, which is comparing two different prices for the same product to see which one generates more sales or conversions, or price elasticity analysis, which is measuring how sensitive your customers are to changes in price and how that affects your demand and revenue.

6 Know your best practices

The sixth and final step to pricing your merchandise is to be aware of best practices. You should strive for consistency and transparency with your prices across all your channels and platforms. You should also be flexible and responsive to changing market conditions and customer expectations, as well as creative and innovative with your pricing tactics and techniques. Additionally, you should be respectful and fair with your customers and competitors, as well as compliant and aware of the laws and regulations that govern your pricing practices. By following these steps, you can price your merchandise competitively without sacrificing quality and achieve your retail goals.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?