INDUSTRY INSIGHT IS THE PRICE RIGHT? ALWAYS W


e often spend a lot of time deliberating over the range we stock and how we display it. It is always worth


spending a little more time on how we set prices and promote the products. It


is after all, these aspects of the


retail mix that have the biggest impact on the profitability of what we sell, assuming of course we are buying as effectively as possible.


Value-based pricing It is not uncommon for retailers to simply apply a standard mark- up or adopt the manufacturer’s suggested or recommended retail price. I have always believed this approach is over-simplistic with a


danger of either being too expensive or missing a profit opportunity. I subscribe to the school of thought that retail prices ought to be fixed more on the basis of ‘what is this product worth?’


‘What can I get


for it?’ ‘What does the competitive situation allow me to sell it for?’ This is often referred to as value- based pricing. This requires a good appreciation of your customers, sound commercial judgement and a thorough knowledge of your competitors.


It also necessitates a reasonable understanding of the price – volume relationship of the products involved. This recognises that there are those products, relatively few in number, where price awareness and sensitivity are high, such that a small


primary reason to promote, which is


to drive the achievement of


Andy Campbell, independent business development consultant, specialising in the gardening and DIY sectors, offers advice on setting prices and promoting products.


change in the retail up or down will have a large impact on the volume. And there are the rest, which make up the majority, where the converse is true. The principle being, when setting prices, to model alternative price – volume combinations to see which one gives you the maximum cash profit delivery; bearing in mind this is what pays the bills.


Objectives of the promotion As far as promotional activity is concerned, the response often given when asked “why are you promoting that line?” is “to increase sales”. This may be a legitimate reason if the objective is to drive footfall, to improve competitiveness or to clear a stock commitment. In my book though, it doesn’t recognise the


incremental cash profit. Therefore, before embarking on any price-based promotion, my recommendation is to calculate the volume uplift required to break even – you might be horrified. A reduction in retail price of 25 percent on a product with a margin of 50 percent with no cost support from the supplier, requires a massive 100 percent uplift just to break even, not accounting for the additional costs of mounting the promotion such as advertising and point-of-sale material.


The message is to be clear on the objectives of


the promotion,


model what you expect to happen beforehand, do it, then review what actually happened afterwards to decide whether it was successful, what can be learnt and whether you would do the same or something different next time around.


Andy Campbell is an independent business development consultant, specializing in the gardening and DIY sectors at both the retail and production ends of the supply chain.


ADVERTORIAL: SUPPLY CHAIN


STAX AMIDST COVID-19 PANDEMIC Market research carried out by the UK’s leading non-food wholesaler has unearthed strong performance trends and positivity in the market despite challenges posed by the Covid-19 pandemic.


helped keep the wheels turning and the supply chain moving. A survey completed by the company showed relationships between wholesalers, customers and suppliers remain stronger than ever before.


W


Managing stock levels the


Maintaining stock levels was a challenge, however,


company


dealt with it as best they could to keep up with demand. Several areas of the market were even boosted by increased sales figures despite the current situation.


Joint Managing Director, David Hibbert, explains: “Suppliers told us that demand for their products has increased during recent months, in some cases by very significant


www.diyweek.net


hilst uncertainty gripped the nation,


Stax


Trade Centres - a leading supplier to the DIY sector -


margins, with DIY and gardening products being a prime example. Some respondents felt this had significantly increased the importance of the supplier/wholesaler relationship, and the wider route to market which the wholesaler provides. “Whilst we realise the past six months have not been perfect, our own experience certainly bears this out. We have seen stock going out of our stores as fast as we can bring it in, which has given us many challenges to contend with. We’ve had to adapt and find new ways of doing things, but the results of our efforts are certainly reflected in our latest set of financial accounts which will be published shortly.”


Flexible and agile As part of the research, many of the independent retailers who rely on Stax were quick to point out how their ability to be more flexible and agile than their larger


SUPPLY CHAIN KEEPS MOVING WITH


Market research carried out by the UK’s leading non-food wholesaler has unearthed strong performance trends and positivity in the market despite challenges posed by the Covid-19 pandemic.


rivals has been a key advantage. Groundbreaking improvements to Stax’s digital presence also helped customers respond


effectively


to challenges such as purchasing stock and adapting to new trading conditions, allowing them to remain busy throughout the pandemic. “Suppliers


realised that online


trading has been more important than ever before,” said David. “It has


helped to fill the gap created by the lack of face-to-face contact between people and has played an important part in helping get their product out into the marketplace and into the hands of their customers.” Key brands such as Dulux, Sikkens and Primeur enjoyed a secure supply chain through Stax throughout the pandemic. Horticultural giants SBM Life Science, whose brands include Baby Bio and Provanto, were also quick to note the benefits of having Stax as their chosen distributor. “We have a strong relationship with the team at Stax and have always been impressed with the dedication they have shown our business, especially during recent months,” says Scott Williams of SBM. “Over the past six months, they have ensured the supply chain is as solid as it could be during a difficult time, and that’s why we had absolute confidence in making them our preferred distributor,” he adds. Stax is the UK’s number one non- food wholesaler and provides genuine trade-only support for independent retailers throughout the nation. Its offering spans an impressive selection of market sectors including gardening, hardware, building, decorating, electrical, plumbing, homeware, bathrooms and kitchens.


For more details, visit the Stax website at www.staxtradecentres.co.uk


NOVEMBER 2020 DIY WEEK 23


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