Convenience Store News

JAN 2017

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34 Convenience Store News | JANUARY 2017 | WWW.CSNEWS.COM SMALL OPERATOR a line extension and is the same cost of current items being carried. Competitor pricing: If your competitors already carry the item and you want to price it competitively. Key value items: If the item is one that drives price perception for your store, you may need to price it more competitively. Margin and markup objectives: So that the items reflect the pricing strategies and objectives you've established for the category. Pre-priced or MSRP. If products like books, news- papers and candy have pre-priced or manufacturer suggested retail price (MSRP) that can be used. Retail pricing is a very important component of your c-store strategy, and you need to take the time to be strategic in how you set your pric- ing now more than ever. Keep an eye on your KVI pricing vs. your competition; establish gross margin objectives that result in acceptable prices for your shoppers; generate enough margin for you to be profitable; and continue to evolve your strategy by never taking your eye off your pricing strategies. NEXT STEPS Develop some overall pricing strategies and guidelines for your store. This should include both overall store strategies, as well as ones specific to your categories. Once you've developed these strategies, you should share them with your store staff and provide them with an understanding of some of the considerations I've shared with you above. This will help them make better pricing decisions for your stores. Once you've defined your pricing strategies and guide- lines, you should complete some pricing analysis on your categories to reflect some of the new considerations. Start to understand price elasticity for your key items, consid- ering how you may want to adjust margin and markup objectives on some categories/brands/items based on shopper perception and market pricing. CSN Sue Nicholls is founder and president of Category Management Knowledge Group (CMKG), based in Calgary, Canada. She is a speaker and consultant, working with business partners to bring category management training solu- tions to different areas of retailing like the convenience channel. Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News. can significantly increase the quantity sold, have no effect on demand or significantly decrease the quantity sold, price elasticity is a very important analytic when making price decisions. SETTING ITEM PRICING Now that you have determined the pricing strategies for your stores and categories, it's important to have a process for setting prices in your store. This process should be based on things like gross margin or mark- up percent, manufacturer suggested retail price, com- petitive pricing, and psychological pricing guidelines. When establishing regular retail prices, you need to first know how to calculate retail price using your gross margin percent or markup percent objectives as part of the retail strategies and guidelines you have already established. Remember, not all items in a catego- ry should have the same objectives based on shopper acceptance to prices, market pricing, and the role the category plays for your store. Understand the differ- ence between gross margin and markup: • Gross margin: You can easily calculate profits from a sales total. If the margin is 38 percent, then 38 percent of the sales total is profit. If the markup is 38 percent, the percentage of sales profit will not be the same. • Markup: You may use markups because it is easier to calculate a sales price from a cost using markups. If the markup is 63 percent, the sales price will be 63 percent above the item cost. If the margin is 38 percent, the sales price will not be equal to 38 percent over cost. Make sure you have a strong understanding of not only how to calculate these important numbers, but also the proper interpretation of them. DETERMINING NEW ITEM PRICING You also need to know how to set new item pricing. You are introducing new items into your mix fre- quently, and you need to have guidelines for consis- tency in pricing practices. Here are some of the ways you can determine new item pricing: Line extension pricing: If the new item is part of

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