Retailers Must Examine Average Price Point

Step Back and Evaluate YOUR Price Position

It’s almost the middle of March and the state of the
Economy and the retail landscape is very close to where
I expected it to be when I made my predictions back in
October of 2008.

The classic customer experience pivots on five critical
elements: Service, Selection, Price/Value, Ambiance and
Convenience.

In our New Economy, Price has taken the lead in being
the most critical element of the shopping experience.
Price has eclipsed Service as the key element in buying
decisions as customers change buying mentalities in
this new era. To support this inference, simply look at
the two retailers who are actually experiencing growth:
Wal-Mart and Costco. Both of these retailers have
experienced growth because of the migration of upper
ended spenders to more value and price driven buying
habits. Great Price and value is the foundation of these
two retail giants and more and more of the buying
community is making buying decisions based on these
elements.

If the proof indicates how critical pure price is to the new
retailer mentality, how does YOUR STORE stack  up to
this new paradigm? Have you adjusted your average price
point to reflect less disposable income and tighter spending
habits? We’re seeing a global drop in high ended retail
spending. Many experts predicted that high ended
retail would not suffer in challenging economic times
because the truly wealthy are never affected by downturns
in the economy. That may be true, however most high ended
retailers survive on purchases by the wealthy as well as the
aspiring wealth seekers who stretch every last penny to
buy that Rolex, the watch of their dreams. It is that strata
of customer that has evaporated from the high ended
retail market and has been forced to make more utilitarian
purchases. After all, a Timex tells the time much like a
Rolex does. We’re already seeing the closure of high ended
retail in Europe and the U.K., and it’ soon to be seen in
the U.S. by the middle of the year.

So, low ended sales are up and high ended sales are down.
I the average price point in your store(s) have not been
adjusted accordingly, you may price yourself out of your
market and lose your hard earned competitive position.

It’s all about Price, Price, Price. Heed the demands of the
customers and their new buying mentality and you’ll
prosper in our New Economy!

TAKE ACTION TODAY

1) Examine average price points and determine if your
price/value position is reflective of tighter spending habits.
Are certain items and certain price points an impossible
value statement in this economy?

2) Consider eliminating very high ended items that only
sold periodically in more buoyant times. Can you mark them
down and sell them off quickly?

3) Review your average price point at store level and consider
marking down more higher ended goods. Can you move
more product and improve cash flow with a lower profit
margin?

4) Consider the introduction of lower priced product lines in
your store. Offer lower priced goods that still offer good value
for your customers.