It will help you to understand different type of pricing strategy used by retail chains of India as well as foreign.

1. Retail ManagemnetBy SUBHO SUTRADHAR

2. FACTORS THAT NEED TO BE TAKEN INTO
CONSIDERATION
Demand for the product and the target
market
Store policies and the image to be created
Competition for the product and the
competitor’s price
Economic conditions prevailing at that
time

3. RETAILPRICING
DEVELOPING A PRICING STRATEGY
1. Cost Oriented
2. Demand Oriented
3. Competition Oriented
COST ORIENTED PRICING
• Basic mark up is added to the cost of merchandise
• Retail price is considered to be a function of the cost and the
mark up
Difference between the selling price and cost is Mark Up
Mark up should cover for operating expenses and transportation
etc

4. RETAIL PRICING
DEMAND ORIENTED PRICING
Focuses on quantities the customers would buy at various prices
• Largely depends on perceived value attached to the product by
customers
• Sometimes a high priced product is perceived to be of high
quality
• Sometimes a low priced product is perceived to be of inferior
quality
Key to demand oriented pricing
• Understanding of the target market
• Value based proposition that they would look for

5. RETAILPRICING
COMPETITION – ORIENTED PRICING
• Competition is the criteria of fixing the price
• Competitors play a key role in determining price
• Retailer fixes price on par with the competitors
• Retailer fixes price above the competitor’s price
• Retailer fixes price below the competitor’s price

6. ELEMENTS OF RETAIL PRICE
1. Cost of goods : Cost of Merchandise
Expenses incurred towards transportation
Taxes, duties levies etc.
2. Expenses Incurred : Fixed expenses
Variable expenses
3. Fixed Expenses : Expenses that do not vary with quantum of
business
eg. Shop rent, Head Office costs etc
4. Variable expenses : Level of sales directly effects variable
expenses.
eg. Merchandise margins, product mix costs
Their Management either enhances or destroy
profitability

7. RETAIL PRICING
IMPORTANT TERMS USED BY RETAILERS IN PRICING
Price Lining : When retailers sell merchandise only at a given
price
Price Zone or Price Range : Range of prices for a particular
merchandise line
Price Point : A specific price in that price range

8. Cost Plus Pricing Mechanism
• Every organization runs to earn profits and so is the
retail industry.
It is the simplest way to calculate price
Cost plus pricing works on the following principle:
Cost Price of the product + Profit Margin (Decided by the
retailer) = Final price of the merchandise.
• According to cost plus pricing strategy the retailer adds
some extra amount to the actual cost price of the
product to earn his share of profits.
Markup

9. ILLUSTRATION OF COST PLUS PRICING
Cost of fabric = Rs.150.00 per meter
Fabric consumption = 1.30 meters
Total Fabric Cost = Rs.195.00
Manufacturing Cost = Rs.100.00
Basic Cost = Rs.295.00
Packaging Cost = Rs. 50.00
Cost Price = Rs.345.00
Mark Up @ 60% = Rs.207.00
Retail Price = Rs. 552.00 Rounded Off
Rs.550.00

10. MSRP
• The retailer sells his merchandise at a price suggested by the
manufacturer.
• Condition 1
The retailer sells the product at the same price as suggested
by the manufacturer.
• Condition 2
The retailer sells the merchandise at a price less than what
was suggested by the manufacturer - Such a condition arises
when the retailer offers “Sale” on his merchandise.
• Condition 3
Retailers initially quote an unreasonably high price and then
reduce the price on the customer’s request to make him
realize that a favour has been done to him. A condition of
Bargain - where the customer negotiates with the retailer to
reduce the price of the merchandise.

11. Keystone pricing
• Keystone is a retail term related to
pricing inventory. It is a pricing method of
marking merchandise for resale to an
amount that is double the wholesale
price or cost of the product.
• When Not to Use Keystone Pricing

12. EDLP
• EDLP is essentially a low-price strategy that is designed to
enhance the competitive position of the supplier.
– It can be used for both branded and unbranded products
• Successful EDLP strategies tend to generate large volume sales
that allow companies to cut costs and pass these savings along
to customers.
• EDLP is attractive to some consumer goods manufacturers
because of the large amount spent each year on promotional or
trade spending.
• Every Day Same Pricing (EDSP) Vs
Every Day Low Pricing (EDLP)

14. Bundling pricing
• Retailer bundles a few products and offers
them at a particular price
• Price bundling helps sale of related items

15. Discount Pricing
• According to discount
pricing, the retailer
sells his merchandise
at a discounted price
during off seasons or
to clear out his stock.

16. LEADER PRICING
• Retailer sells few items at deep discounts
• This increases traffic and sales on complementary
items.
• The product must appeal to a large number of
people
• The concept should appear as a bargain
• Items best suited for this type of pricing are those
that are bought frequently
• Example : bread, eggs, biscuit, milk etc.

17. Time Pricing
Time-based pricing is a special case of price
discrimination in which producers charge
different rates for a given good or service
depending on the time, day, month, and so on.
Eg: • Wednesday Bazaar • Festive Season Pricing
• Special Offer Period pricing • Sabse Sasta Din •
School Time • Seasonal Offers

19. MARKET SKIMMING
• Strategy to charge a high price initially
• Gradually reduce it if necessary
• Policy is a form of price discrimination over
time
• To be effective several conditions are to be
considered

20. MARKET PENETRATION
• Opposite of Market Skimming
• Aim to capture a large market share by charging
low price
• Low prices stimulate purchases
• Low prices discourages competitors from
entering the market
• Economies of scale is required in manufacturing
or retail to be effective

22. Psychological Pricing
• Certain price of a product at which the
consumer willingly purchases it is called
psychological price.
• The consumer perceives such prices to be
correct.
• A retailer sets a psychological price which he
feels would meet the expectations of the
buyers and they would easily buy the
merchandise.

24. THANK YOU
SIR