Pricing is art and science combined! To make a profit for your wholesale store, take a spoonful of the cost of the goods you have sold. To it, add another spoonful of your personal labour, then add two spoonful’s of overhead and then top it up with a dose of competition. Then stir vigorously with a sharp pencil. For you to sell to retailers, you must set prices in line with the niche of the industry that you are dealing with. Hence you must set prices close to those of your competitors for you to remain viable in the market.
You know that your retailers want the best deal since they are likely to react to competitive prices from your competitors because the price of a similar product should gravitate between you and your competitor. Since you and your competitor have the same inputs, you can easily find out your competitor’s price and then adjust yours accordingly to your advantage. If you learn that your opponent is charging more than you are and he is getting the market, you can raise your prices too and capitalise on the demand. On the other hand, if you realise that your opponents are charging lower than you are and retailers are flocking to their store, do not hesitate to lower your prices.
Alternatively, you do not always to raise or lower your prices because your competitors have done so. When your competitors raise their prices, you can lower yours. However, you can only do this hoping that you will sway those customers who are not willing to pay those extra cents for the same product.
Do you want your wholesale clients to be loyal to your business, turning to you for all their stock needs? Then you must know how to price your goods competitively.
Know Your Competition
My favourite quote from Sun Tze “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
Before you take any step, you must know your competition. To know your competition, you must do a competitive pricing analysis to what other similar businesses are doing in the market. You will use this knowledge to determine what kind of stock you need to have.
Knowing how your competitors have priced their products will help you to set competitive prices so that you can sway the market to your advantage. You need this knowledge for you to set prices that will help you to make that margin that you want.
While this knowledge about your competition might not be all about changing the prices of your goods and services, it is still an excellent tool in your hands that you can use to attract the customer’s attention to your store and have them return again and again.
As always, there are limits to which you can adjust your prices due to competition because there are other factors more than the just competition that will determine the selling price of a product.
For example, if the cost of producing a particular product goes up, you do not have any other option but to raise your prices to cover the high production cost. That is not all, if the price of gas goes high and you must transport your goods from the manufacturer to your warehouse, you must factor this when setting your price.
Another limit to competitive pricing is demand. If your retailers are not willing to buy an individual product at a given price, you do not have to change the price to please them while your business suffers.
There are circumstances under which you might consider using competitive pricing to avoid being affected by the high prices.
For example, if you are dealing with the sale of office furniture, you can use a competitive price method to secure a deal with a retailer for different types of furniture. You can achieve this through either of the two negotiation plans.
One, you can learn the prices that your retailers have been buying from your competitors and lower the price for them per unit furniture they purchase.
Secondly, you can allow your wholesale buyer to bargain till you agree on a price. On either case, you stand to win because your goods are not perishable hence even if you do not have a sale at once, you will not run at a loss but can wait till the prices are good enough for your business.
Knowledge Of Inventory
If you want to use competitive pricing methods to determine the prices of your stock, then you must know the items that you and your competitor have in common. This knowledge will help you if your competitor is running out of stock and you have enough stock; you can raise your prices to your business’s advantage.
The good thing about having this knowledge is that you are the only one who has the stock of that item and you can be sure that all the clients will be becoming to your store for it. So even if you raise the price they have no other place to go to get it, they must buy from you. Your business will make a good tidy profit, even for that short period when your competitor does not have the ready stock.
Know What Customers Want
When you are in a competition, it is not only your competitor that you need to know, you must know what the clients want. Knowing what your customers can help you to lower the prices for them so that they can stop going to your competitor and come to you.
Just knowing what customers want is enough to make them come to your warehouse since you can easily get their attention by your competitive price. The more the number of retailers you know who want that product, the higher you stand a chance of making a handsome profit because you will have more customers coming to your store to buy.