The Elements of Retail Pricing
There is an old saying that few things in life are both good and cheap. Nonetheless we as consumers often ask ourselves how certain things could cost as much as they do.
In defence of the retailer we must better understand that there are many components to cost not only the direct cost of the product.
For example if a meal is ordered at a restaurant, it is not only the steak and eggs we are paying for but many other behind the scenes cost factors.
If we explore this further with particular reference to our dry cleaning industry, we can hopefully outline matters further.
Let us start at the front door. Firstly premises need to be secured in a convenient and protected location preferably with adequate parking and within proximity to a mix of other shops which provide customers with maximum shopping convenience.
Back up utilities should also be provided within the complex if service delivery is to be prompt and regular.
Then the décor of the shop should be attractive and welcoming, avoiding any institutionalised appearance.
A stable staff must be trained and motivated to always strive to provide best service and advice. Their availability during regular opening hours must be matched to clients’ needs and outside business hours emergencies must be anticipated and where possible catered for.
Service should be supported by good computerised systems and other technology so as to facilitate staff efforts and provide better client satisfaction.
All cleaning, drying and finishing equipment needs to be of leading brand and regularly serviced by capable technicians just like your car. Critical components must be made readily available which may mean back up inventories.
All fixed assets require insurance which must also provide cover for other commercial risks
There are many grades of chemicals with quality generally reflected in price. Spot and stain removal requires a wide range of such to be readily available.
Then with many calls for client visits, collections and deliveries the reliability and availability of transport is therefore necessary.
Effective marketing must also be regularly undertaken to maximise turnover thereby spreading all costs over a wider client base.
Then finally the not insignificant 15% deduction for VAT and commercial bank charges reduces the price contribution still further.
Some of these costs can be directly attributed to any service provided. However it is not only direct costs that must be recovered but also all the other many supporting indirect costs and tax as described above.
All these are subject to regular escalation of varying degrees and cannot always be passed on to the consumer.
Any ability to leave a surplus after costs within a pricing structure is limited by the degree of competition within any industry as well as the care that must be generally observed of not making any product or service unaffordable to the consumer. Higher prices will inevitably reduce demand to at least some degree.
So the retailer and The Real Don Dry Cleaners in particular must provide the best service and product under severe constraints and where there is no opportunity for profiteering.
There must always be a delicate balance between the necessities of cost recoveries through acceptable pricing.
To remain in business costs need to be met and unfortunately the higher the quality offered of services or products the higher the costs.
We at The Real Don can assure our clients that we are do all in our ability to provide best service at the best price and will always strive to do so.