Lowering your prices can potentially drive more gross profit. It may seem counter intuitive, but sometimes lowering the price of something will increase gross profit percent and dollars. For instance, if you carry something that has 10 sales units that you pay $10/case for and are only able to sell 2 units at 50% gross profit (i.e. $2/ea), then you are returning only $4/case for a net loss of $6. If dropping the retail to $1.50 (33% gross profit) would allow you to sell 4 units, then you would return $6/case and reduce your net loss per case to $4. Obviously, you won’t keep the heat on too long if you have too many items that are net losses but it is important to remember that reducing shrink also increases gross profit, especially if the way you reduce your shrink is by selling more.
Consider what produce categories in your department might benefit from experiencing more turns. In the tropical category for instance one might lower prices to increase turns and limit product going to waste, whereas others may increase prices to justify carrying the item. In the latter situation, owners or department managers would like the few items they sell to cover the loss of items that may never sell due to low customer demand.
Here's a few factors to consider at you develop a pricing strategy aimed to build profits:
1. Re-purpose: If you choose to keep prices higher (thus typically limiting sales, but covering loss by higher gross margins) can you use a percentage of the case for another purpose? Can you work this fruit into cut fruit / prepared foods, etc. to minimize overall waste?
2. Split Cases: A number of produce wholesalers may offer a split case opportunity. In this case consider whether the additional cost per unit for a half case still may be to your overall advantage if you are currently shrinking it. Alternatively, consider how you could do this in-house?
3. Happy Customers: Customers love getting a deal, one might say that by carrying must-have specialties they are performing a service to customers. By lowering prices in favor of customers trying new items or being able to regularly access these items within their budget this can go a long way in developing loyal regular satisfied customers.
Owners may have different pricing or marketing philosophies, but hopefully these tips will help you find a happy medium to optimal profitability and keeping customers coming back for me. Good Luck!
Consider what produce categories in your department might benefit from experiencing more turns. In the tropical category for instance one might lower prices to increase turns and limit product going to waste, whereas others may increase prices to justify carrying the item. In the latter situation, owners or department managers would like the few items they sell to cover the loss of items that may never sell due to low customer demand.
Here's a few factors to consider at you develop a pricing strategy aimed to build profits:
1. Re-purpose: If you choose to keep prices higher (thus typically limiting sales, but covering loss by higher gross margins) can you use a percentage of the case for another purpose? Can you work this fruit into cut fruit / prepared foods, etc. to minimize overall waste?
2. Split Cases: A number of produce wholesalers may offer a split case opportunity. In this case consider whether the additional cost per unit for a half case still may be to your overall advantage if you are currently shrinking it. Alternatively, consider how you could do this in-house?
3. Happy Customers: Customers love getting a deal, one might say that by carrying must-have specialties they are performing a service to customers. By lowering prices in favor of customers trying new items or being able to regularly access these items within their budget this can go a long way in developing loyal regular satisfied customers.
Owners may have different pricing or marketing philosophies, but hopefully these tips will help you find a happy medium to optimal profitability and keeping customers coming back for me. Good Luck!
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