December 07, 2022

Prices Going Up

Here's one of the things I keep seeing in 2021-2022. Look at annual sales for this one specific category.

  • $2.1 million in past year.
  • $2.5 million a year ago.
  • $3.0 million two years ago.
  • $2.7 million three years ago.
So, yeah, you can see the COVID-bump from two years ago. But in the past year sales declined by more than 10%. That's probably not COVID-bump related.

Here are price per item purchased metrics for the past four years.
  • $31.53 in the past year.
  • $24.94 a year ago.
  • $22.79 two years ago.
  • $22.40 three years ago.
Well, prices are up ... way ... way ... up.

Let's look at gross margin percentage.
  • 53.8% in the past year.
  • 49.6% a year ago.
  • 48.1% two years ago.
  • 48.9% three years ago.
Those figures make it look like prices were increased faster than cost of goods increased.

Let's look at sales from items selling at/above their historical average price point.
  • $1.8 million in the past year.
  • $1.8 million a year ago.
  • $1.8 million two years ago.
  • $1.5 million three years ago.
So, items selling at/above their historical average price point continue to generate comparable levels of revenue. This means items selling below their historical average price point are in severe decline.
  • $0.3 million in the past year.
  • $0.7 million a year ago.
  • $1.2 million two years ago.
  • $1.2 million three years ago.
This may not be an issue of raising prices ... instead, it looks like an issue of not discounting anymore. By not discounting, the brand "appears" to have increased prices, and the perceived increase in prices results in a sales hit.

What happened to total gross margin dollars generated?
  • $1.1 million in the past year.
  • $1.2 million a year ago.
  • $1.4 million two years ago.
  • $1.3 million three years ago.
The differential in price (this year vs. last year) resulted in fewer gross margin dollars.

This is the story for one category. You need to look at all categories, of course.

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