The price is right?

With toy shops up and down the country as packed as they have been all year, Steve Reece delves in to what he believes is one of the most contentious areas of the industry: pricing.
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Pricing is possibly the most contentious area in our business.

I’ve often heard battle hardened sales people say ‘if we supplied retailers for free they’d still say our pricing is too expensive.’

Indeed the perennial bloodbath that is the retail pricing/promotional arena can appear to be a never-ending downward spiral in terms of more and more for less and less.

Clearly suppliers need to stay strong to maintain margin. Sometimes this is easier said than done though, especially when dealing with skilful buyers who now exactly how to play the game to pressure your prices and margins down.

Larger companies tend to manage this via extensive pricing/discount sign off procedures; this ensures that any promotion, discount or reduction receives appropriate scrutiny before someone signs on the dotted line.

Larger suppliers with very strong, established brands and hot licences have considerably more leverage and clout than they sometimes realise.

Can retailers really afford to be without guaranteed hit products? No, not really.

The challenge comes for companies with less firepower in terms of must list products.

For all but certain online retailers who have seemingly endless SKU counts, there are limitations to how many products are getting listed.

Retailers usually list hot or established products first, on which they often make less margin. They then distil down from hundreds or thousands of SKUs that have been presented to them to fill the last few slots and add higher margin products into the mix.

So when listings are so tenuous, how do you avoid giving away the baby with the bath water in terms of pricing/margin?

Firstly, have a clear pricing strategy that delivers appropriately versus those competing for your listings.

Secondly, have really good products that consumers will want to buy (obvious, but a clear advantage).

Thirdly (and this is the part many smaller companies don’t implement so well) ensure you have a pricing process/sign off procedure that applies pressure back the other way e.g. a finance director who always says no to price reductions (most finance directors I’ve met have little trouble assuming this role).

Then be prepared to walk away – budget low, set your overheads lower and be prepared to leave some opportunity behind if taking it will adversely affect your pricing, margin and profit structure.

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