June 21, 2017

Raising Prices

There's an odd dynamic happening across traditional companies ... old-school catalogers and traditional retailers.

Here's how it works.
  1. It's too hard to compete in the "supply chain game" with modern brands.
  2. Sales need to increase.
  3. New items bear the brunt of price increases.
  4. New items don't sell very well, because they are too expensive.
  5. All items are discounted 40% to "move inventory".
  6. This "de-values" the fair price of winning items, opposite of the goal of getting rid of poor-selling new items.
  7. The p&l fails.
  8. Repeat.
When you look at new items, run your "Class Of" report and measure average price per item sold. The table looks like this:


Here's the trend in new item prices.
  • 3 Years Ago = $32.82.
  • 2 Years Ago = $23.52.
  • Last Year = $32.10.
  • This Year = $42.16.
Now we know why productivity wasn't great in the past year ... prices increased significantly, driving down unit volume.

You might be ok with this ... but if you aren't ok with this, then you need to understand the ramifications so that you can fix your business, right? And you can do it - you have the talent. You can "fix it"!!