The next thing you’d want to know once your stocks are ready is how to price your merchandise.
For most sari-sari and grocery stores, a 20 per cent markup is the norm. You may go a bit higher – say, up to 30 per cent, if you’re the only one in the area who sells a particular item.
Basically, a businessman must know how to price competitively, attractively and fairly.
Some retailers begin by offering very low prices. Bargains are sure to attract customers and build up patronage for the store. Later, the profits are raised, but just enough to earn small profits. Eventually, when business grows, certain items are still maintained at very low prices. These items, called “leaders,” keep customers coming.
A basic principle is pricing is knowing the retail mark-up. You must also know when to mark down. Another must-know is how much the competition charges so you won’t be pricing much higher or lower than rival stores.
What is markup? It is simply the amount you add to the cost price to determine your retail price. To illustrate:
Cost + mark-up = selling price
Cost price is the buying price, plus delivery charges or transportation expenses you incur in bringing the merchandise to the store. For example, a bill of goods carries an invoice of P10,000, plus P150 delivery charges. If you want a markup of 30 per cent, then you would be pricing these goods at P13,195.
Mark-ups may be applied in any of the following ways:
Use single markup. As a small retailer, you might find it simple to solve all your pricing problems by using a single markup which you apply in everything you sell.
Use several markups – Here, you classify the goods into any number of groups based on differences in the cost of the merchandise, cost of handling, appeal to customers, salability, etc. Then apply markups for each of the groups. Group A, for example, may be given 30 per cent markup; Group B, 25 percent,; and so on.
Price items individually – Sometimes, you will find it necessary to deviate from any pricing rule and price items individually. When you do this, you are looking more at the profitability of each item in order to maximize its contribution to your total profit.
There is also the concept of markdowns.
Since prices are constantly on trial, you will have to change original price tags. The reduction in the original price is known as a markdown.
Mark down items when there is a decline in the wholesale price and when your competitors who brought later are able to sell at lower price than yours. Markdowns are also necessary to clear “odds and ends” accumulated over time due to poor stock control and wrong buying decisions.
Receiving, checking and marking goods
Regardless the size of your store, be prepared to receive, check and mark the goods you buy.
Receiving is when you actually take physical possession of the merchandise. Keep a record book that will contain all relevant information of goods delivered, including: item, quantity, buying price, description, supplier, date of delivery and terms of payment. You can refer to this later when paying for your purchases to check if these were actually received.
After receiving the items, move the goods to the place where they will be checked and marked.
Checking is when you verify the accuracy of the merchandise delivered against the orders. Here are steps to follow:
Check invoice against purchase order (PO). At the receiving point, compare the PO with the invoice to determine if the description and quantity of goods tally with those ordered. Check also if terms of sale on the invoice are as stipulated in the PO.
Open and sort the merchandise. Check for damages. Note down damages on the invoice which you may use when making claims later.
Finally, check for quantity.
Controlling your stock
Sometimes, shoppers leave your store without buying because you do not have the items they want or not in the size or some other specification they prefer. Stock control, combined with supportive supplies, reduces walkouts.