It’s never too late to start pricing right, but far better to price right from the start.
The NextGen Pricing System suggests the best price for an item that can be expected to sell within 75 days. Initially, NextGen obtained these data from a limited number of stores around the country. But in the last 2 years, the data base has grown to include stores in most states and provinces in North America. As most of these stores have been in operation for years, their addition to the data base enables Nextgen to better examine pricing strategies relating to area income levels and competition.
What have we learned? Far more stores under-price than over-price1
Why do stores tend to under-price? The fear that higher prices will turn away buyers
Underlying this fear is the assumption that buyer decisions are based on price more than value. This is to say that buyer decisions are driven more by item-specific price ceilings, i.e., “I would never pay more than ten dollars for a pair of sneakers” than on Value, i.e., I would never pay more than $10 for a pair of Converse” sneakers.” While the former mentality may be common among thrift shop customers, our analysis clearly demonstrates that it is the “Value” mindset that is prevalent in better consignment and resale shops, not the “Price” mindset. Simply put: Customers pay more for better brands than lesser brands.
Give your customers credit. They are value conscious and knowledgeable thanks to Google and other internet shopping and price-comparison sites. Always accessible at the press of a button on their smart phone.
What’s to be gained by raising under-prices? Customers, Sales and Profits
Right pricing is not what the market will bear, but what the market will embrace while maintaining timely sales. Dollar sales will increase. Margins—bottom-line profits—will likewise increase. Item sales may not, but should not decline.
Raising the price of under-priced items allows a corresponding increase in the amounts paid for these items. To get better brands, we must pay for them. The more we pay, the more we get.
Right pricing is Fair pricing, meaning fair to seller/consignor as well as buyer. In the end, it’s a win-win-win. The sellers earns more, we owners earn more, and buyers have access to valued items they would not otherwise see.
The Good news? While under-prices cannot be abruptly changed for fear of alienating longstanding customers, prices can be nudged up (optimized) gradually and imperceptibly over a number of years. Clients use the NextGen Pricing system to manage these changes.
1 Certainly, these data could be skewed. Perhaps the over-pricers are gone, having priced themselves out of business. Or just maybe we’re missing the under-pricers who didn’t have sufficient margins to cover their costs of doing business. Let’s reasonably assume a bit of both.