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One of the key issues that retailers have to get right in their business is their price and gross profit management policy.
We use the Costcutter C-POS scanning system to update our prices daily and ensure that all our lines are displayed and sold at the correct price at all times.
Managing this area of our business very closely is vital in preventing profit loss. I know that to get the most out of our investment in scanning we need to invest time into managing the system. We get price alterations everyday and change the shelf edge labels each morning to ensures that our prices are always correct and that we will make the profit margin we expect.
Our system provides us with a large number of reports, some are more important than others. There is one that shows the products where the profit has strayed outside the margin we set. Armed with this information we can correct these anomalies quickly.
We trade in an area that has a significant number of competitors from both the big supermarkets and independent retailers. It’s a tough trading environment. To ensure we are competitive we use Costcutters supermarket price band. Costcutters have 3 price levels to cover their retailers different trading challenges from Convenience at the ‘higher’ price end stepping down to High Street in the middle and Supermarket their lowest prices.
There are some categories that we set the margin ourselves because we are sure that our market place will stand higher prices. These categories include confectionery, crisps and medicines. We also aim to make 8.9% on non price marked cigarettes and tobacco. Another strategy we adopt is to use odd number pricing, using prices that end in 1, 3, 5, 7 or 9 across our store which makes it harder compare prices.
With a couple of thousand products it is all too easy to get pricing wrong and every mistake will cause a loss of profit. Selling too cheaply obviously throws money away, but pricing products to highly may stop customers buying.
Here are my tips on managing price and profit:
Understand your customers and your market place
Set your preferred margin by category and put up a notice in your office so that everybody is aware of what you are doing
Get an EPoS system – and get trained to use it
Have a disciplined approach towards price changes and manage them on a daily basis
Make sure your price labelling is clear for customers and employees.
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