Retailers Must Examine Average Price Point
Posted: Tuesday, March 10, 2009
by Ron Pawlowski
The Retail Institute
It's almost the middle of March and the state of the Economy and the retail landscape is very close to where I expected it to be when I made my predictions back in October of 2008.
The classic customer experience pivots on five critical elements: Service, Selection, Price/Value, Ambiance and Convenience.
In our New Economy, Price has taken the lead in being the most critical element of the shopping experience.
Wal-Mart and Costco. Both of these retailers have experienced growth because of the migration of upper ended spenders to more value and price driven buying habits. Great Price and value is the foundation of these two retail giants and more and more of the buying community is making buying decisions based on these elements.
If the proof indicates how critical pure price is to the new retailer mentality, how does YOUR STORE stack up to this new paradigm? Have you adjusted your average price point to reflect less disposable income and tighter spending habits? We're seeing a global drop in high ended retail spending. Many experts predicted that high ended retail would not suffer in challenging economic times because the truly wealthy are never affected by downturns in the economy. That may be true, however most high ended retailers survive on purchases by the wealthy as well as the aspiring wealth seekers who stretch every last penny to buy that Rolex, the watch of their dreams. It is that strata of customer that has evaporated from the high ended retail market and has been forced to make more utilitarian purchases. After all, a Timex tells the time much like a Rolex does. We're already seeing the closure of high ended retail in Europe and the U.K., and it' soon to be seen in the U.S. by the middle of the year.
So, low ended sales are up and high ended sales are down.
if the average price point in your store(s) have not been adjusted accordingly, you may price yourself out of your market and lose your hard earned competitive position.
It's all about Price, Price, Price. Heed the demands of the customers and their new buying mentality and you'll prosper in our New Economy!
TAKE ACTION TODAY
1) Examine average price points and determine if your price/value position is reflective of tighter spending habits.
Are certain items and certain price points an impossible value statement in this economy?
2) Consider eliminating very high ended items that only sold periodically in more buoyant times. Can you mark them down and sell them off quickly?
3) Review your average price point at store level and consider marking down more higher ended goods. Can you move more product and improve cash flow with a lower profit margin?
4) Consider the introduction of lower priced product lines in your store. Offer lower priced goods that still offer good value for your customers.
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