5 Strategies for Pricing your Retail/Wholesale product

The main aim of any business is profit maximisation. This is also applicable to retailers and wholesalers. However, they need to understand that they should not set a price that will make the customers shy away from buying them. When the strategies do not work and most of the goods do not sell retailers and wholesalers resort to clearing excess inventory. During festive seasons, people prefer to buy surplus inventory. Nonetheless, this strategy can only help in clearing the warehouse and not in earning profits as the goods are sold at a discounted price.

Retailers and wholesalers need to have a great strategy in place when it comes to pricing their products. The first step of this strategy begins with the wholesaler-retailer relationship. A wholesaler sells his products at a lower price to the retailers than to the customers. Therefore, when a retailer places an order in bulk, i.e. they decide to buy bulk cell phone accessories or any other products, the wholesalers discount the price of their goods. Hence, bulk buy mobile phones at a discounted price benefits the retailers in the long run as this enables them to stay updated with the tastes and preferences of customers.

Following are the pricing strategies which are adopted by retailers and wholesalers:

1. Perfectly competitive strategy: In this strategy, a retailer and a wholesaler can either fix the price or the output of the product to be sold but not both at the same time. This strategy is only possible when one has the market power to raise price above marginal cost and is completely fearless about losing supernormal profits to the new entrants in the market.
2. Market Research: Before fixing a price, it is mandatory for one to do thorough research about the market. Market research helps in understanding the demand, supply, total output, and target setting process. For example, lower pricing gives a competitive edge to some retailers as this technique helps them in catering to the needs of their target customers who are more cautious when it comes to the budget. Thus, sound market knowledge plays an essential role in fixing the prices of the products.
3. Calculating the cost of goods manufactured: Retailers and wholesalers incur huge expenses while purchasing goods. So naturally, they aim to sell their goods at a price much higher than the cost price in order to maximize profit. Here, one must adopt an effective strategy and that is calculating the cost of goods manufactured. This includes the total cost of a product along with considering other important aspects like materials, labour, shipping, handling, warehousing, and other additional costs.
4. Cost-plus pricing: Normally, retailers and wholesalers adopt cost-plus pricing strategy. But cost-plus pricing is a risky strategy as it works on assumptions. Here, one assumes that all the products can be sold and if not, then the profit is lower.
5. Stay Updated: One cannot fix the same price for a long time. Prices tend to change because of the expenses, customers and competitors. Therefore, one needs to shift their prices in order to keep pace with market challenges. Hence, it is very essential to stay updated about the factors that influence market demand.