Hardware Retailing The Industry's Source for Insights and Information
Zone pricing at the big boxes continues to be one of the biggest challenges for independent retailers in terms of determining a profitable pricing strategy that will work for their stores.
The motivations behind why the big boxes are opting for zone pricing are fairly simple. For one, as the industry’s larger chains find themselves under greater pressure to deliver profits for shareholders, they struggle with not being able to raise prices across the spectrum because of the huge effect it could have on their overall price images.
Advances in POS and pricing technology have allowed them to deploy a less conspicuous approach at the market level and use a variety of factors to strategically raise or lower individual item prices based on what the markets will bear.
Another motivation behind the switch is likely tied to pressure created by price comparison software. Today’s consumers can simply pop a product into Google or an app made specifically for price shopping such as Red Laser and have immediate access to comparable prices from vendors both local and national.
“For independent retailers like you, this means that now, more than ever, is the time to take a closer look at pricing models and establish a pricing strategy that ensures your operation is not only price competitive but that you aren’t missing out on your margin enhancement opportunities,” says John Dillon, vice president, pricing at Orgill.
While the big boxes have a lot in their favor regarding pricing including volume, infrastructure and technology, there several strategies independent retailers can use to their advantage.
Utilizing a variable pricing model from your distributor is an essential key to creating a successful price image. It would be next to impossible to gather the real-time data of pricing of every item in your inventory, but most distributors have done a majority of this legwork for you.
Many distributors promote variable pricing models can get a retailer nearly 70 percent of the way toward its pricing strategy.
