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Retail Design for Vehicle Showrooms

Why the Right Retail Design is Important for Motor Showrooms

When vehicles undergo constant design upgrades and enhancements to make them more appealing and efficient, it stands to reason that the spaces that market them should do so too. Inspired by new ideas of efficiency and aesthetics that guide the designs of cars and other vehicles, the showroom environment can aspire to the same principles, powered by branding and relevant retail design drawings. In fact, the right retail store layouts can almost immediately and directly impact sales and productivity.

As the corporate branding world is trending in the direction of specific fixtures, fittings, furniture and other collaterals that showcase and reinforce corporate identities in car stores, the role of comprehensive retail store plans in transforming showrooms into bespoke retail spaces cannot be underestimated. This is where 3D architectural modelling and BIM modelling services become invaluable.

To further branding goals, the structure and circulation of the retail space is critical. Once this is decided, ambience can be developed through lighting, sound, materials and branded touchpoints. Brand graphics and their positioning build the confidence of potential customers. Motor showrooms display their products in vast open spaces. Exact positions of each vehicle at the showroom layout is dimensionally represented by accurate retail drawing sets. While preparing the layout plan, the length and breadth of any display systems or racks are shown.

Within the branding purview of structure and circulation, consistency is important. Exterior branding, structural features and signage should follow inside and entice, interest and fortify the product. To ensure this consistency, a dedicated team is essential. Each client employs individual corporate branding, communication, style guidelines and standards. A dedicated team assigned to a client can be trained to deliver each client requirement. These can include:

  • Space planning design
  • Interior design
  • Elevations – exterior and interior
  • Store refurbishment drawings
  • Updating existing designs
  • Detailing of store features, such as signage, mannequin locations and light fixtures

Typically, a project manager is identified, who then undergoes training with a client representative. This training is passed on to a dedicated team of engineers and architects, who study design guidelines and deliver high quality drawings to the client and receive regular feedback. Communication is accurate and issues are resolved quickly.

Motor Retail Design Elements

Standards for each aspect of the showroom experience are planned and designed, from internal and external spaces to entrances to circulation systems. Retail space must allow for both permanent and non-permanent features, such as features that may change when new models arrive. Structural constraints affect overall design; columns, stairways, ceiling height, windows and emergency exists are all factors. In motor showrooms, all available space must be utilised. Floor plans guide circulation, which then inclines the consumer to travel to important displays and, ultimately, to the sales associate. Car showrooms can be quite grand, displaying double-height glazing, bright lights and expensive stone/ceramic floors, but customers require clear routes to the service area/workshop. Also, showrooms must be large enough for the number of cars that need to be displayed. Even service bays in the body shop and the number of technicians must be considered. The use of detailed retail design drawings and BIM technology ensure that the required parameters for all these features are adhered to.

Vehicular display is prime, but there is also a high standard for building services that must be maintained. Effective cooling in customer areas must counteract heat absorbed in highly glazed areas. Sustainable properties could lead to lower energy bills, lowering overheads. With effective MEP coordination, the features to alleviate loads, energy use and carbon emissions that could be planned are:

  • Extended eaves, brise-soleil and canopies, which reduce solar gain, especially on the main façade
  • Roof lights to provide basic lighting needs
  • Enhanced insulation for cladding and roofs
  • Motion-detecting lighting for bathrooms and other areas not always in use
  • Double-glazed glass insulated compact sectional access doors that allow maximum natural light, while being useful for vehicular movement. They conserve air conditioning and insulate the building.

A soothing yet impressive ambience adds extra edge to the showroom experience, and this is a zone where MEP drawings, models and coordination play a major role. Primarily, this is achieved by lighting and materials, but sound and audio also play a key role, providing it appeals to the target market. But to get back to lighting, the right lighting may perhaps cause the greatest dramatic effect in a motor showroom. Functionality and the ability to showcase display vehicles are vital. This involves layered lighting, with a choice of intensities and fixtures. The lighting of the ceiling and roof should cover structural features and direct customers to key areas.

With valuable display vehicles, security is important. Ideally, motor showrooms have access control, alarms and sophisticated internal and external CCTV, with movement tracking and links to remote monitoring centres, yet another feature to benefit from relevant MEP coordination.

Perspective

In the end, a well-executed retail space must be viewed from the consumer’s perspective. Retail design should control the customer’s view of the retail space. All of these crucial factors would be difficult to plan without the necessary elevations and walk-throughs provided by advanced architectural designs, specifically retail store CAD drawings and 3D models by Revit.

Retail Design Drawings for Motor Showrooms

Effective planning for motor showrooms call for exceptional design models and drawings. Preferred drafting stages and services for retail spaces include:

  • Store Concept
  • Floor Design & Fixtures
  • Electrical and Lighting
  • Customized Colour and Material Matching

Designers and drafting service personnel with relevant inter-domain expertise can utilise their experience to coordinate business and retail for a brand. Services on offer are:

  • Zoning, layout design
  • Interior design, graphics and visual branding
  • POS displays and locations
  • Design detailing and seasonal roll-outs

These can be customized with integrated 2D retail drafting for specific client requirements. With BIM modelling solutions, these can also be turned into detailed 3D space rendering, where the entire retail space plan can be visualized by the client. Textures of walls, colour schemes and other details can be viewed in realistic conditions with the use of 3D space renders. This allows modifications before the design is approved for production drawings. A major advantage is that scale modelling costs can be saved.

Seamless project execution can occur using AutoCAD and Revit software. This means project steps can be monitored in real time, projects can be completed and moved to the quality check stage, which can be performed thoroughly based on project scope. The retail drawing sets can be reviewed in its final form by the client and valuable feedback can be implemented. In the final design stages, a final quality check can be conducted. Skilled drafting services by retail space planners are updated with global retail trends, some still in a process of evolution. These services can greatly contribute to maximising potential in a motor showroom and provide customers with the best planned retail environment.

Since retail design drafting services are inevitable in the process, it seems logical to consider how cost-effective and quality-efficient they can be. Global trends lean toward the growing popularity of outsourcing these tasks. The reasons are compelling.

Advantages of Outsourcing Retail Design

Less Costly – Outsourced retail design drawings are competitively priced compared to the same quality and quantity of work executed locally, and since many outsourced firms employ work shifts, drawings or 3D architectural models are delivered faster.

Global Exposure – Outsourcing firms are exposed to retail establishments across the globe. Thus, the technical personnel are well qualified, well trained and well acquainted with international building codes and brand guidelines.

Flexibility – Outsourced firms can generally operate either as a small dedicated team or as a large team of 40 draftsmen or more to execute projects of larger volume or those with quick turnaround times, so work can be scaled to perfectly meet requirements.

Updated Expertise – Outsourced firms employ technical personnel who excel at BIM and are generally well updated on other software, including AutoCAD, Revit, etc.

Extensive Experience – Trusted outsourced firms have been designing and drafting retail spaces for years for clients in Europe and the UK.

Quality outsourcing services provided for retail design include:

Production Drawings Sets

Besides providing complete construction drawing sets from Autodesk (Revit or AutoCAD) to the retail industry, SolidWorks has been used to create engineering drawings. All key drawings, including floor plans, internal elevations, external elevations, construction plans, setting-out drawings, composite plans, finishing plans, lighting and ceiling plans, comprehensive equipment schedules and material and component take-off data are included.

Retail Design

Retail design, documentation, and project management, concept design and layouts are provided.

3D/4D Models

Using Revit Architecture and Revit MEP tools, 3D models and scan-to-BIM services, using point cloud data, are provided, with 4D scheduling added for new site construction.

Retail BIM Data

BIM services provide automated schedules to ensure, accuracy, speed of design output, rendering and visualisation tools to create realistic views.

Manufacturing/Assembly Drawings

Manufacturing and assembly drawings for bespoke retail furniture, fixtures and fittings, using AutoCAD detailing software is provided.

Floor Plans

Colour-coded floor plans and 3D plans.

Computer Generated Images

Computer-generated images for external and internal views are generated, showing images with artistic and watercolour effects.

Evolution of Online Retail

Competing in a high-pressure business scenario has become a challenge for retailers. As an effective alternative sales channel sellers are looking at the internet, which gives them direct access to target customers. Online retailing (also known as e-tail) is a web-enabled interface between a retailer and its target consumers for selling products and services on the web with the facility of ecommerce. These kinds of retailers are also known as e-tailers. Almost all big retailers are now electronically present on the World Wide Web.

After the invention of WWW (World Wide Web) web browser in 1990’s, release of Mozilla Netscape navigator in 1994 and opening of first online retail by Pizza Hut, the online retail has gone through a lot of transformation and today it is still developing in a very diversified way. E-tail has become very popular in the areas of apparel, arts and handicrafts, books, car rentals, computers and electronics, cosmetics, financial services, gifts and novelties, etc. This retail could be an e-store, internet shop, web shop, web store, online store or virtual store.

Some of the major advantages of e-tail which makes it popular among the retailers are low investment cost, direct access to target customers and quick return on investment. This kind of retail format helps the retailers to serve their customer quickly and more efficiently by offering them a detailed portfolio of products and services. On the other hand, availability of the point of transaction data helps the retailers to analyse and interpret their target customers. It has become the most efficient way to offer valuable information to the customers like discounts, promotions, new and existing products as per the customer requirements and past shopping behaviour. Availability of plenty of information about the products has increased the confidence level among the consumers.

Online retail industry in India is likely to be worth Rs. 70 billion by 2015 according to Associated Chambers of Commerce and Industry of India. The buying-selling trends from leading e-tail portals indicated that online retail market currently stands at Rs. 20 billion and is growing at a steady annual rate of 35%. Among Indian states, Maharashtra has the best IT infrastructure, both from the retail industry perspective as well as consumers. Mumbai accounts for a 24 per cent share in India’s e-commerce transactions. Some of the popular Indian online retailers are Staples Inc, Home Shop 18, Indiaplaza, eBay India, Future Bazaar, India Times, Rediff, etc. Easy availability of broadband services and increasing internet penetration is acting as a support to the growth of online retailing. The increasing purchasing power of the Indian customers is set to bring online shopping boom in India. One of the latest additions to online retail is advertising through social media websites like Facebook, Twitter, Google+, etc. Apart from website technologies, retail leaders are trying to adopt video, mobile and social media strategies with a view to provide richer, more engaging and user friendly experience.

After bringing revolution in the metro cities, online retailing is set to create sensation even in the rural areas. Furthermore, with the opening up of the Indian economy in relation to change in the FDI strategies, it is a wake-up call for retailers that have done too little to develop an online strategy as retail giants like Tesco, and Amazon have already started actions and strategy implementation in the Indian retail market.

Retail Mix

 Retail Mix is a method of combining different retail variables in alternative ways to achieve a high marketing strategy to attract the customers. The different variables may include product merchandising, price, promotion, store location, resources and processes. In other words retail mix is an approach in which retailers setup their stores by mixing different retail variables to attract the customers by offering different services to yield the maximum profit.

The mixing of different retail components differs from store to store and the products, and services offered by the retailer.
The compositions of different variables of retail mix are:

1.Product Merchandising
• Product development – New product can be built to compete with the existing product or to improve the established product.
• Product management – Managing the developing, marketing and sale of a set of products.
• Branding – This is how the retailer attracts the customers with good quality of goods with a name to the product.

2.Price
• Cost – Developing a pricing strategy.
• Quality – To provide quality products.
• Profitability – To reach high profitability.

3.Promotion
• Sales promotion – Promoting the sale through advertising.
• Sales management – Managing sales through different medias.
• Direct marketing – Delivering direct promotional messages to the customers.

4.Store location
• Retailer image – Based on the type of retail store, retailers can depict their image in order to attract their target customers. This involves mixing of different components such as infrastructure, customer perception of the store and its competitors.
• Target market – Retailer targets the specific group of customers which aims to provide services. They consider different conditions like demographic, geographic and psychographic information.

5.Resources (Staffs/ Employees)
• Staff interaction – It is the sufficient human resources that is required in a retail store to interact with customers.
• Internal marketing – It is the process where higher level of management in the structure motivates and empowers employees to deliver a satisfying customer service.

6.Processes
• Order processing – Dealing with the different orders from the customers and other source in retail.
• Service delivery – Retailers provides different kinds of services which follows different types of delivery systems to reach the customers and hence to satisfy the customers.

Retail Mix Planning: The different types of planning are as follows:
1. Top down approach – The management will set the goal and plan for each level.
2. Bottom up approach – The various units in the structure plans and sets goals for their objective. This is submitted to the higher level of management for the approval.

The advantages of Retail Mix are:
• Customer behavior of different stores is observed by analysis and interpretation of the above factors. Based on the result of the analysis and interpretation of the shop, the retailer can prepare their business strategy which can attract the customers.
• Helps retailers in finding different assortment plan.

A perfect blend of the different retail components within retail organization determines high retail management strategy. It even helps in building clear corporate mission and sound business portfolio. Retail mix in different types of stores gives different ideas to retailers to establish, plan and build their mission to move towards their goal.

Retail Formats

One of the key determinants of a retailer’s success is the format that they use to present to their target customers. A retailer can chose a format based on the kind of store design they want to render, the locality they would like to establish, the various products and services they wish to provide and the approach taken to pricing. The most important aspect is the format should be ideal to their target demographics.

In the past, the Indian retail sector has been dominated by small independent players such as traditional and small grocery stores. It is in the recent times that organized, multi-outlet retail concept has gained acceptance and has since then gained momentum. As per the study conducted by the Indian Council for Research on International Economic Relations (ICRIER), on the subject ‘Impact of Organized Retail on Unorganized Sector’, the retail business is estimated to grow at 13% per annum from US $ 322 billion in 2006-07 to US $ 590 billion in 2011-12.

A report by FICCI on the “Indian retail: on the fast track” shows that various organized retailers are currently experimenting with different formats of retail trade. It is difficult to predict which format will have a winning edge over all others in view of the fact that the Indian market is yet to mature.

The different sorts of retail formats that retailers could adopt are mom-and-pop or kirana stores, specialty stores, department stores, discount stores, convenience stores, hypermarkets, supermarkets, malls, category killers, e-tailers and vending machines.

Mom-And-Pop or Kirana Stores: is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder.

Specialty Stores: A typical specialty store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores.

Department Stores: often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service. For example: Food World in Bangalore.

Discount Stores: offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands. However the service is inadequate.

Convenience Stores: is essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases.

Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. A classic example is the Metro™ in Bangalore.

Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000-40,000 square feet. Example: SPAR™ supermarket.

Malls: has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof. Example: Sigma mall and Garuda mall in Bangalore.

Category Killers or Category Specialist: By supplying wide assortment in a single category for lower prices a retailer can “kill” that category for other retailers. For few categories, such as electronics, the products are displayed at the center of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity. For example: Pai Electronics™ store in Bangalore.

E-tailers: The customer can shop and order through internet and the merchandise are dropped at the customer’s doorstep. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in home shopping. However it is important for the customer to be wary about defective products and non secure credit card transaction. Example: Amazon and Ebay.

Vending Machines: This is an automated piece of equipment wherein customers can drop in the money in machine and acquire the products. This kind of system is currently not widely used in India. For example: Soft drinks vending at Bangalore Airport.

Retailers can opt for a format as each provides different retail mix to its customers based on their customer demographics, lifestyle and purchase behavior. A good format will lend a hand to display products well and entice the target customers to spawn sales.

How to Price My Product for Retail: 11 Easy Steps

I am often asked as a consultant, “what is the first thing you will do after I hire you, what’s your plan of attack?”. The answer is simple, pricing. This might seem strange to most people as I am sure you can think of a plethora of other things you would rather have me working on than pricing, however the simple fact is, if your pricing does not work we are finished before even beginning.

Product pricing should be an essential first part of your overall go to market product strategy, however again and again I see companies leaving this to the end and in some cases simply guessing. There seems to be a mystique around pricing a product that often scares companies into a panic and this is where mistakes get made that can cost thousands of dollars down the road. The mystery of margin, program, net, gross, delivered, FOB etc can leave you feeling overwhelmed and therefor uninterested.

Well; not to worry. You can put away your taro cards and cancel your appointment at the physic. We are going to take the mystery out of pricing by showing you:

  • How to determine MSRP (Manufactures Suggested Retail Price)
  • How to determine your raw cost
  • How to determine your raw landed cost
  • What is MAP pricing and should you use is?
  • What is gross margin and how to determine it?
  • What is “Program” and how does it affect your price structure?
  • What is net margin?
  • What is adjusted net margin and what should this number be to keep your business moving forward?
  • How to price your product to best avoid knock offs.
  • The difference between pricing your product online and pricing it for a retailer.

Alright, let’s get right to it!

1. MSRP – Determining your manufactures suggested retail price is critical to the rest of your pricing strategy. Every retailer, buyer, distributor and etailer will want to know this number as they want to remain competitive with the market. Before simply applying a 6 or 7 multiple to your cost in order to gain your retail I suggest you do some due diligence on your competition. What are the other items in this category selling for? Is your product better, worse or the same as what is on the market. Does your product have features that separate it from the competition and can bring a premium retail price or is it a value offering from the competition and needs to be priced lower. To bring a bit of clarity to this subject let’s create a scenario. Let’s say your company has created a new smart phone case and you need to establish a base MSRP. Your Raw Landed Cost(you will learn this below) on this item is $7. If you times your cost by a 7 multiple to gain your retail you end up with a $49.99 MSRP. On the surface this MRSP seems to work, however after some research you find the competition has this type of product retailing at $39.99. This is where you will have to decide if your product (an unknown) can bring a $10 premium to known brands already on the market. If not you will have to bring your retail down to $39.99 and rerun it through our proprietary pricing worksheet to see how this new retail affects your over all profit number. At the end of the day please remember this one truth, MSRP is created by the customer. To be more specific your product is really only worth what customers are willing to pay for it and not a penny more which is why pricing is such an important part of the process.

2. Raw Cost – This is the number your company pays for a fully packaged, production quality product at the manufacture. Please note that a production product is not a hand made sample or one of a few sample products run from your factory. A production product is a product pulled directly off the production line ready to go to a retailer. It is this cost you are after.

3. Raw landed cost – This is the number your company pays for a fully packaged, production quality product including the cost of bringing the product to the US if it is manufactured overseas or to your warehouse if it is manufactured somewhere different then where you will be warehousing it. How much should you factor into your product cost to land your product here in the US from overseas? As a rough estimate only, you can take $4700 / the units of product that fit into a 40ft container. This will give you a rough idea of how much you should add to your unit cost to have a complete landed raw cost. Please keep in mind this is for rough estimates only, you should replace $4700 with your actual cost when you are receiving logistics quotes. Ex. If your the raw cost of your product at the port in China is $1.47 and you can fit 10,000 units in a 40ft container your cost per unit to flow the product to the US would be $.47. This would make your Raw Landed Cost on this item $1.94. If your product is manufactured in Wisconsin and your are bringing them to your warehouse in Texas you would simply substitute the $4700 for the cost of shipping the product from WI to TX.

4. MAP Pricing – MAP or Minimum Advertised Price is a policy used by some manufactures to create stability in advertised pricing of their product. It means that no retailer or etailer can list or advertise a MAP’d product under the MAP price set by the manufacture. Brick and Mortar stores can sell these items or even list these items in store for any price they choose as long as they do not advertise them for less than MAP. This sound like a pretty good deal and you are probably saying to yourself, “Why wouldn’t I create a MAP policy?” Here are a couple things to consider when making this decision; 1. Once you establish a MAP policy and distribute it to your retailers you must treat each retailer the same irrespective of their volume. This means if you stop supplying a small retailer because they violated your MAP 3 times and this is clearly stated in your policy then you would also have to stop supplying a large big box chain if they did the same or risk a huge law suit, 2. Some retailers simply don’t want to do business with products that are MAP priced as it creates issues with their marketing plans.

5. What is gross margin and how to determine it – Gross margin is the difference between your selling price and your raw, landed product cost. It is generally expressed as both a percentage and a dollar amount. To determine the dollar amount the formula is SP-Cost. To gain your gross margin % you would use the following formula formula: (SP-Cost)/SP. SP = sell price. If your selling price is $79.99 and your raw landed cost is $27.5 the equation for gross margin dollars would look like ($79.99-$27.5). Your gross margin dollars would be $52.49. To gain your gross margin percent the equation would look like this ($79.99-$27.50)/$79.99. Your gross margin for this item is 65.62%.

6. What are program costs – Program costs can be considered any additional cost the retailer is going to ask you to be responsible for paying. These costs should be built into your cost structure prior to quoting. Not taking the time to understand these costs of build them into your cost structure prior to quoting pricing to a retailer is a recipe for disaster. Your company must be able to incur these costs and still produce a healthy margin. Some common program costs are:

  1. Returns allowance – A retailer might ask for a % off invoice to cover any returns. This % can range from 2%-10% depending on the product.
  2. Freight – At times retailers will ask for a “Delivered Cost”. Delivered cost means that you will have to pay to deliver the product to the retailer therefor you must factor this cost into your pricing structure.
  3. MDF – MDF stands for Marketing Development Fund. This would be money that your company would accrue for future promotional opportunities or a retailer will require that you contribute to a fund.
  4. Mark Downs – This is a fund you would accrue for use in liquidating slow moving inventory from a retailer. Many times retailers will not mention this, but will come to you later asking for money to help move stagnate product. It is best to accrue for this on your own so you have money when the time comes. For example; some club stores do not transfer merchandise from warehouse to warehouse which means you might get an order from warehouse A, while getting a markdown request from warehouse B only 5 miles away.

It is important to note that some retailers will negotiate program costs with you upfront and will deduct the negotiated percentage direct from the invoice when paying you. Other retailers will not negotiate this upfront, but will still make deductions from your invoice when paying.

7. What is Net Margin – I calculate Net Margin is your “Gross Margin” minus all of your program costs.

8. What is adjusted net margin and what should this number be to keep your business moving forward – Adjusted net margin is your “Net Margin” minus any rep or broker commissions. If possible always insist that you pay commissions on net margin. In some cases the broker or rep will be the one negotiating the program costs and he or she will be more likely to negotiate better on your behalf if their commission is affected. Achieving the best ANM will depend on several factors including your business structure and volume. Generally I like to see Club Store ANM above 25%, regular Big Box above 35% and Specialty retail above 45% if possible.

9. How to guard against knock offs by pricing your product correct the first time – Today’s manufacturing is much different then in years past. It is very common for companies to have product produced overseas, a world away from where their company resides. It can be costly to spend the needed time overseas to manage the manufacturing process and as a result companies send their product ideas to overseas factories in an effort to get product produced cheaper and more efficiently. The most common fear I hear when companies are shopping for a factory to produce their goods is they do not want to get knocked off. While this is a legitimate concern it cannot keep you from moving forward. There are two strategies, I believe, will give you the best protection against knock off product if it shows up.

If at all possible be first to market and establish your product brand as the authority as quickly as possible. In the bedding market there are plenty of competitors to Tempurpedic, however customers still prefer the Tempurpedic brand over the competition as they were first to really bring memory foam mattresses to market in a big way. Price your product to be competitive right from the beginning. Gouging the customer simply because there is no current competition will not serve you in the long term. When the knock offs come calling, and they will, the buyers who carry your product will be reluctant to change if the difference in price is not more than 15%. However, if you went out with high cost and the competition is now knocking at a much lower cost and retail, the buyers will be more likely to seriously consider it.

10. The difference between pricing your product on your website and pricing it for a retailer. – Many retailers will begin by selling their products on their own retail website, which I encourage with all my clients. I am always reluctant to work with clients who are not willing to sell their own products directly to the customer. When selling online the pricing formula is simple. It costs X to make my product, I sell it for Y and get to keep the difference. Once you establish this retail online it becomes known and can be difficult to adjust later. When you begin selling your product to retailers they will want to use your current online retail or lower as their go to market retail. Now you must take your retail and deduct 40-65% margin that the retailer will want, program costs they will want your company to pay and then finally your cost of goods. What is left over, at this point, can be to little to run a company and in some cases flat out in the negative. Because of the above it is important to establish your entire pricing structure right from the beginning. Below are some categories to consider when creating your pricing structure.

  1. Big Box retail
  2. Specialty retail
  3. Club store retail
  4. E-tailers
  5. Department store retail
  6. Your website

11. Getting ready – To recap, below is a list of the items you will need to create the cost structure you will quote to the retailers you are wanting to carry your product. Have fun and good luck.

  1. MSRP – You must have an idea of what your product will retail for (see MSRP noted earlier in this article).
  2. Margin – If you don’t yet know what margin your target retailers are looking for you can obtain help with one of our pricing worksheets noted below.
  3. Program costs – If you don’t yet know these numbers see how to obtain our pricing worksheets at the bottom of this article.
  4. Raw landed product cost – We can’t help you here. In order to finish your pricing you will need to have this number.
  5. Rep or broker commissions – If you will be using a rep or broker and have negotiated their commission rate you will need to have this number handy.
  6. Units sold – This section is where you will estimate your units sold to this retailer for a 12 month period. Creating this number will also help you with your volume projections and production planning.

 

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