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17 Chapter 17 Pricing in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH.

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Presentation on theme: "17 Chapter 17 Pricing in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH."— Presentation transcript:

1 17 Chapter 17 Pricing in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH

2 Agenda  Newswatch Assignment Announcements Minutes Presentation Sign-Up  Finish Financial Merchandise Management questions from last day  Discuss pricing concepts including short video  Pricing calculations (answers will be posted on Moodle)

3 External Factors  External factors can affect a retailer’s price strategy (to varying degrees). These include: Economy  Value of the Canadian Dollar (2007 parity) and state of economy 2008 credit crisis, consumer confidence levels, etc Value of the Canadian Dollar Government  Price regulations governed by Competition Act and enforced by the Competition Bureau (examples of violators: Forzani, Suzy Shier, Grafton-Fraser Inc.); tariffs; minimum wage; ‘end geographic price discrimination’Competition Act end geographic price discrimination Customers  Price sensitivity varies by market segment (economic, status, assortment, personalizing and convenience oriented customers) and depends upon the customer’s perception of value Suppliers  Both goods suppliers and retailers seek control (consider distribution arrangements, vertical integration, private label) therefore power distribution becomes important  All other retail expenses (resulting from other suppliers,ad agencies, utilities) need to be offset and therefore considered in pricing Competitors  Market pricing results when shoppers have a lot of choice  Price wars (difficult to end) can erupt with drastic impact (Target v WalMart 2014)Target v WalMart 2014

4 Pricing Options for Retailers Upscale orientation At-the-market orientation Discount orientation Compare the price points on men’s jackets from Harry Rosen, Gap, Sears and Wal-Mart. Each provide an example one of the three general pricing options a retailer might pursue.Harry RosenGapSearsWal-Mart Compare the price points on men’s jackets from Harry Rosen, Gap, Sears and Wal-Mart. Each provide an example one of the three general pricing options a retailer might pursue.Harry RosenGapSearsWal-Mart

5 A Framework for Developing a Retail Price Strategy Skimming v. Penetration Remember: category management

6 Broad Price Policy Choices  Through a broad price policy a retailer generates an integrated price plan with short- and long-term perspectives and a consistent image. The broad price policy needs to be integrated with all other controllable elements of the retail strategy mix (merchandise, location, communication, operations).  Moores Moores  Commercial Commercial

7 Price Strategy  Demand-Oriented Pricing  Demand ceiling  Psychological pricing  Cost-Oriented Pricing  Price floor  Initial mark-up, maintained mark-up  Competition-Oriented Pricing  Demand-Oriented Pricing  Demand ceiling  Psychological pricing  Cost-Oriented Pricing  Price floor  Initial mark-up, maintained mark-up  Competition-Oriented Pricing

8 Implementation of Price Strategy  Need to consider importance of : Price Stability  Customary pricing and variable pricing (includes yield management pricing) Price Consistency among customers  One-price policy and flexible pricing Price Perception  Odd pricing, leader pricing, multiple-unit pricing, price lining

9 Customary pricing One price policy Various price perception tactics Variable pricing One price policy Various price perception tactics

10  “A recent study by William Blair, an investment bank, underlines the price gap between Amazon and its rivals in the retailing world (see table). The report compared the prices of 100 randomly selected goods at each of 24 American retailers with those items that were also available on Amazon.com. It found that almost half of the goods were listed on the online retailer's site too, and that Amazon's prices for individual products were on average 11% below those of the stores. The study also noted that Amazon's discounts were in many cases deeper than those offered by the retailers' own websites.” Amazon: The Walmart of the Web, The Economist, Oct 1, 2011.The Walmart of the Web

11 Canadian Online Grocery Pricing Comparison Walmart.ca v. Amazon.ca ProductWalmart.caAmazon.ca Kashi Go Lean Crunch$4.97$4.99 Imagine Organic Tomato$2.97$7.38 Campbell’s Condensed Light Homestyle Chicken soup $1.97$2.98 Heinz Ketchup 1L$3.00N/A

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13 Black Friday  ack-friday-early ack-friday-early  What is it?  Why do it?  What kind of pricing strategy(ies) does this represent?  Is extending Black Friday a good strategy?  n n

14 Black Friday in Canada million Canadians plan to take a sick day on Black Friday 4.1 million Cdns will take vacation days on Black Friday or Cyber Monday Absenteeism costs employers $16 billion annually Black Friday/Cyber Monday expected to generate $13 billion in revenue from Canadians Canadians will spend ~$5 billion cross-border that wknd Source: Huffington Post million Canadians plan to take a sick day on Black Friday 4.1 million Cdns will take vacation days on Black Friday or Cyber Monday Absenteeism costs employers $16 billion annually Black Friday/Cyber Monday expected to generate $13 billion in revenue from Canadians Canadians will spend ~$5 billion cross-border that wknd Source: Huffington Post

15 Timing Price Promos 2010 Eddie Bauer Remembrance Day Sale 2010 Eddie Bauer Remembrance Day Sale

16 Price Adjustments  Price can be used as an adaptive mechanism to accommodate factors affecting the retailer like demand, seasonality, merchandise costs, competition and pilferage (markdowns and additional markups)  Markdowns should be carefully controlled and their timing planned  Although not an adaptive mechanism, employee discounts are also considered price adjustments


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