Opening up a retail store is a daunting and tedious work to embark on. It involves setting retail and wholesale prices for customers from several backgrounds and needs. So, setting the average retail markup is important. This has to be done to ensure minimum loss and maximum customer satisfaction. As soon as you launch a new product you might have to answer the pricing questions of the wholesalers and the consumers alike. It is best to set two different retail markups.
What do we mean by Profit Margin?
Profit margin can be referred to as the total profit that the retailer earns before taxes and other cuts.
Let’s say you sell dresses of various kinds. If you pay $20 for each dress you want to buy, and you sell them for $40 each, the retail margin is fifty percent.
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Setting up the right SRF or the Suggested Retail Formula
First, we need to decide on an apt markup percentage. Then subtract the markup percentage from 1. Divide the Wholesale price with the result you have obtained in the first step. This will be the retail price according to the Suggested Retail Formula. The retail markup concept is also used here.
Doing Proper Research is key to reaching the target customer base. The market needs to be assessed to see if and how other comparable brands have set different retail markups or not. Then start to work backward to see if the retail price you have targeted is feasible or not. Based on these costs and benefits, and set a standard retail markup.
The average retail price is hence easy to calculate and assess. Once you set the right retail price, now is the time to set different retail prices.
Keep two markup prices. One with a lower markup and one with a higher markup. Once you see that customers have become familiarized with your store, announce a discount and set the higher markup price but give heavier discounts. This will not only increase your profits but also keep the popularity of your shop intact with the consumers.
Getting into the retail business is not as tedious as one might consider it to be. You will only need to have some pointers and then you can get your own retail or wholesale shop ready in just a few months.