Case Study “Great sales, no money”:
Last year a food company came to me and asked if I could help them with their pricing. As with all my potential clients I asked them a couple of clarifying questions to get a handle on if I could help or not. As it turned out this company was already in a large club store and was doing quite well. There was only one issue, they were not making any money. Like so many before them they had been blinded by the allure of a Club store only requiring a 14% or less margin on their item. They had wild visions of how they would spend the extra margin coming their way. Boats, cars, the sky was the limit, or so they thought. It wasn’t to long before they received their first check and noted a % had been taken out for returns, which was an area they had not counted on. Next there was the business of markdowns in the underperforming warehouses, this was money they had not counted on either. Finally, in an effort to stimulate sales, they were asked to promote their product by placing in on an end cap and were paralyzed by the price tag. These items are not the retailer sticking it to the little guy, it is simply the cost to do business in mass retail and must be factored in before any pricing is offered.
Ultimately we were able to find some efficiencies in their logistics and packaging which freed up some short term margin. We also worked with their manufacturing to create a broader, longer term solution which made sense.
It's tough enough to gain retail distribution in today's market, the last thing any manufacture wants is to find out they quoted incorrectly.
Lesson: Never simply assume your pricing will work. Know your back end costs and ensure you feel good about your bottom line prior to quoting any pricing to any retailer.
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