Canada's business magazine for traditional natural health retailers

3 minutes reading time (613 words)

The price of survival

Perhaps the most challenging aspect of running a retail operation in the wellness industry in Canada is working with suppliers who have inconsistent or unsustainable pricing strategies.

The result is that retailers are left between a rock and a hard place and have to be very adept when setting their retail price.  Just high enough to maintain margins, but low enough to retain credibility.   Due to market conditions, online sales, and industry consolidation, this balance is and will become increasingly difficult.

The development and enforcement of sustainable and consistent pricing is the key to all of our survival.  If we continue on our current path, service will be traded for efficiency, independence lost, margins will disappear, retailers will go, and suppliers will shortly follow.

In order to develop and enforce a proper strategy, suppliers must have both competence and confidence.

Competence

This shouldn’t be the case but it is amazing how many times I hear retailers say that they have to teach their suppliers the difference between mark up and margin.

There are huge price variations for most products and brands in this industry.  So much so, that it actually hurts the retailer’s reputation to have certain brands on their shelf.  How can we expect customers to have a proper sense of what a product is worth?  The customer is being trained to always keep looking for a better price, rather than better service.

It is possible to work towards a set retail price (not a $10 - $20 window). Two years ago, a sales rep told me it was impossible to have the same price online and in store.  Is this what our suppliers still believe?   The future of retailing is having the same experience online and in store, and part of that experience is pricing. 

Assuming that a product is good, it can be expected that a retailer will only sell and promote a product if it makes financial sense.  Independents may be great at educating consumers, but if the margins are tight, they will generally promote something else.  Most retailers are trying to run a business, not a charity.  Set a proper price and the retailer will start selling your product, maintain this price and they will keep selling it.

Confidence

A set retail price (SRP) is only effective if the supplier is confident enough to enforce it.  There needs to be top-down direction about where the product will be sold, and the willpower to communicate and follow through. 

Suppliers must be financially stable enough to stop shipment, if a retailer is not following their pricing strategy.

Perhaps a supplier should never start shipping unless they can afford not to.  It’s risky having customers that are too big to lose.  Retailers should also be consulted when determining a retail price, but do not allow them to develop and control your strategy.

Best practices should be discussed and shared among leaders so that consistent and sustainable pricing becomes normal in this industry.   For instance, if a supplier hears that others stop shipping to discounters, it will help them become more confident.

Be willing to admit that SRP’s are not working.  These are usually fantasy, pie in the sky prices, that a supplier wishes their product was worth, but in reality, virtually nobody is using them. 

The idea of a set retail price will seem idealistic to many, but I truly believe it’s possible.  It may also seem that the onus falls solely on the supplier but it will be equally important that the retailer take the time and effort to help, rather than hinder this change. 

We live in one world, and our survival depends on one price….not two.  •

 

 

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