Updated December 14, 2023
A retailer must be extremely aware of their strategy for ensuring that their pricing is done accurately and in a timely manner.
Failure in this seemingly simple matter can lead to all sorts of problems, from unintended “loss leaders” that sap profits, to confused customers who become indignant if a wrong price cannot be honored.
Here are six pricing mistakes that retailers should avoid:
One of the top pricing mistakes for retailers is placing price tags that are higher on top of originally tagged items that were lower.
Nothing makes customers madder than peeling back a price tag. In this instance, a men's short-sleeved shirt on sale for $13.99 was marked down from $20 with an original price tag showing it originally sold for $10. Outfit your price-changers with a razor blade if necessary to scrape all of the other prices away - no one wants to emulate J.C. Penney.
While a POS system will charge the correct price when scanned, the customer will demand the posted price on a mismarked item. Customer service demands that you comply but your staff has to be trained to correct this situation immediately on the entire inventory of the item still in the store. If they don’t, you risk losing your profit margin on every one of those items sold.
Likewise, an item that is correct in the POS system but holds a higher price on the shelf could cripple your turn of that line. The fix? Always have someone spot-check.
Figuring out the markup on a product is not particularly difficult, especially since every smartphone has a calculator. Finding someone to do it responsibly and correctly is another story. Overpricing and underpricing occur if the store owner or manager does not figure out the correct selling price when they order the item.
Sometimes, you get a great deal on a line, and you aggressively mark it up. It pays, however, in both inventory turnover and gross margin, to charge a price similar to that of comparable products from other vendors.
There’s usually a reason you got a great price on something – your vendor knows something you have yet to discover – it doesn’t sell.
Pricing an item under keystone because it won't move at the price it should be marked to deflates the hope you’ll be profitable on the product. You did the work in finding the product, paying to ship it there, and showcasing it in your rented retail space; you should also reap the reward.
Pricing too low means when you have to put the item on clearance, you are paying customers to take it away.
Sheer laziness accounts for many of the mistakes that occur with pricing merchandise. Don’t let it stop you from checking your current costs at the vendor level and updating your prices on reorders as necessary. Otherwise, you may discount yourself out of the market by undercutting your profit margin.
Wrong pricing is one of the most common (and often hidden) mistakes that can cripple a retailer.