Taking into account pricing objectives and factors, the retailer develops an overall pricing strategy for a brand or product group, which determines the price range in accordance with the positioning of the store. As an example, we can cite the Kopeyka discounter chain, which provides a minimum set of trading services, which allows the price to be set lower than in other retail chains.

Pricing strategies must take into account two important factors: the possible base retail price level and the change in price relative to the established level. All decisions regarding the choice of pricing strategies are directly related to the positioning of the retail enterprise: an exclusive/expensive store designed for fairly wealthy people, or a store that sells exclusively goods at low prices. Another important decision that must be made when determining prices for the entire range is whether to change the set prices or keep them stable.

Pricing strategies vary for traditional conditions of sale of goods, for new goods or changed terms of sale and for the sale of assortment groups of goods(Fig. 4.3).

Currently for traditional conditions for the sale of familiar goods The most commonly used strategies are: a strategy of stable low prices and a strategy of changing high/low prices.

Stable low price strategy targeted at price-sensitive consumer segments. A number of factors have prompted trading companies to pay more attention to this strategy. Growing popularity private labels, unbranded goods and discount stores reflects the price elasticity of consumer demand. This strategy is used by many stores, which emphasize that their retail prices constantly remain somewhere between the regular price level and the level of sales offered by competitors. Using this strategy does not mean setting the lowest prices for the goods sold; we are talking about the general price level and the corresponding positioning of the store in the minds of the consumer. Once buyers realize that prices are consistently at an acceptable level for them, they increase their one-time purchase volume as well as the frequency of their visits.

Rice. 4.3. Basic Pricing Strategies

store. In addition, price stability in this situation due to the lack of sales practices leads to a reduction in promotion costs and an increase in the quality of service. In a quiet environment, without a large crowd of buyers attracted by sales, sellers are able to devote more time to each visitor.

Variable High/Low Price Strategy aimed at a market segment that places less importance on price. Many people use this strategy for several reasons, in particular when there is little profit from inexpensive goods or there is too much competition in the market.

The high price strategy is also driven by the creation of a prestigious image. A higher price corresponds to the desired level of quality of trading services; a low price can reduce demand, since it does not fit into the price range familiar to the buyer.

Retailers using this strategy in some cases offer products at higher prices than competitors who follow a stable low price strategy, but often hold sales and other sales promotions. Like the stable low price strategy, the variable high/low price strategy has gained great popularity in recent years. Once upon a time, fashion stores reduced prices on goods only at the end of the season, grocery stores and pharmacies held sales only when their suppliers offered special prices if warehouse stocks exceeded standards or the goods were about to expire. Today, in the fashion trade, the response to increased competition is a significant reduction in the intervals between sales. With this strategy, the store is able to gradually offer the same product to different market segments. When a fashion product first arrives in a store, it is offered at the highest price (a high trade margin is determined by the “fork” of values). Fashion leaders who are least price-sensitive and consumers who find it difficult to find a product that suits them often buy new items as soon as they go on sale. Then a gradual reduction in trade margins begins, and the number of consumers increases. At the end of the season, when the biggest sales begin, the last ones in line are the buyers attracted by the low prices of the goods.

Stores must plan a certain number of price reductions and be prepared for forced markdowns, but it is very important to strive to optimize their number. To correctly determine the moment of markdown, trading companies should accumulate sales statistics. Items that have had price cuts in the past and items that are not selling well this season need to be closely monitored. If, for example, you had to significantly discount certain clothing sizes, it would be advisable to reduce their purchases next season.

There is a possibility early And late markdowns of goods. Many stores begin to reduce prices on slow-selling items early in the season, when demand is still quite active, avoiding end-of-season sales, making room for new inventory and increasing cash flow, which contributes to an increase in the number of store visitors. Store-wide inventory releases (late markdown policy) are typically done twice a year after peak sales. This policy is most widespread in expensive department stores and specialty stores (although other stores selling seasonal goods do not neglect it), its main advantage is the ability to sell goods at regular prices for a long period.

In recent years it has gained popularity combined strategy early and late markdowns. Stores selling fashionable clothes, for example, after the first six weeks of sales reduce prices by 20%, after nine - by another 30%, etc., until all the goods are sold. Staggered markdowns are thought to generate relatively higher profits than infrequent but sharp price cuts, perhaps because shoppers are eager to purchase items before stocks run out or a sale ends. Consumers who were hesitant to purchase during the first wave of price cuts have the opportunity to “catch up” during the second.

Setting the price of a new product and a new trade service is difficult because the retailer has little data to assess consumer demand. For this purpose they are used Pricing strategies for new products or stores. The more innovative a product or trade service is, the more difficult it is to assess consumer reaction before it enters the market. In these cases, retail trade, as well as product manufacturers, use strategies skimming and market penetration.

When using skimming strategies The store sets a high price for a new product, providing for its possible reduction as competitors become similar products or services. Thus, the store, as the owner of a unique product or trade service, sets an inflated price, which becomes a conditional payment for innovation and uniqueness, and has the opportunity to receive excess profits for a certain period until the product or trade service provided loses its uniqueness. This strategy is most effective if the demand for a product or service is inelastic, the manufacturing company enjoys patent protection, and the store has the exclusive right to sell this new product or provide another service.

Within market penetration strategies A retailer sets a low price for a new product or its unique trading service, as a result of which it rapidly gains a significant market share. Then, taking advantage of its position as a market leader, the store has the opportunity for significant competitive maneuvers due to increased potential.

Final retail prices in accordance with pricing strategy for assortment groups are established both for all products sold in the store, represented by various assortment groups, and for individual groups of goods.

Trading companies set prices for goods of one product group, resorting to price series strategies. In this case, the store can generate higher profits by offering products to different segments based on their price sensitivity. Following this strategy, the company covers the entire demand curve: from thrifty consumers to those interested in prestigious goods. Each product is designed for a segment characterized by its elasticity of demand. The situation of such pricing in trade marketing can be characterized as “conditional compensation”, i.e. When setting different prices for different groups of consumers, the store adjusts the trade markup in such a way that a decrease in the markup for one group of goods is compensated by an increase in the markup for another. The total amount of trade margins remains unchanged, but such manipulations with trade margins can speed up the sales process. The operation of Perekrestok supermarkets along with Mini-Perekrestoks (stores for socially disadvantaged segments of the population) can be considered as “conditional compensation.”

Purpose prices for additional devices- a very interesting retail pricing strategy. Along with the main products, many trading companies offer additional devices that are not necessary to satisfy the buyer’s basic need. An example would be the situation of selling a car. The car is sold in a basic configuration, and additional devices can be ordered for it (electric windows, air conditioning, etc.). Some additional devices are sometimes already included in the declared price of the car; a list of other additions is offered separately. The basis of the strategy in this case is to determine the consumer price comparison base and set a low trade markup on it, which pays off with a higher markup level, for example, on an additional device that is quite unique.

Purpose prices for accessories- a strategy somewhat similar to the previous one. Some products require the use of accessories, e.g. they are actually mandatory. For example, a camera is the main product, and the film for it is auxiliary, a vacuum cleaner is the main product, and filters for it are auxiliary. In this case, a low price is set for the main product and a high price for the auxiliary product.

Stores often form kits goods, setting a single price for them. Perhaps buyers have no particular desire to purchase a complete set of all components of the set, but the savings are so significant that the consumer buys it. The ideal situation is when the set is compiled so competently that it is beneficial for both the seller and the buyer. This strategy is the main one in McDonald's pricing, where the consumer has the opportunity to save money by ordering lunch by number. This is also beneficial for the company - the time for one order is reduced, demand is easier to estimate, it becomes more predictable, which facilitates logistics tasks.

After determining pricing goals and strategies, the retailer is faced with the question of choosing pricing method.

Pricing plays an important role in operating profitably in retail. What important components influence pricing and what strategy to choose so as not to lose profit.

Smart pricing plays an important role in working for profit in retail. Profit in retail trade can be achieved when a correctly carried out sale of goods at a retail price lower than the purchase price gives the expected positive result. The components of the retail price are: the cost of the product, the ratio of demand to the number of supply of the product on the market, funds for delivering the product from the manufacturer to the consumer, value added tax (VAT), exclusivity of supply and the ability of the population to buy this product.

All of the listed elements must be taken into account in pricing in retail, because a 100% markup on the purchase price, as is done in markets, does not cover such amounts for the product as: delivery, space rental, utility costs, exclusivity of the product for a given territory, competitiveness of the product. Here it is also necessary to calculate the amount of VAT that the seller pays to the budget and is calculated by him as the difference between the amount of tax calculated when selling goods (work, services, property rights) to the buyer and the amount of tax charged to this seller when he purchased goods (work, services) , property rights) used for taxable transactions. For retail trade, you still need to draw up a sales plan for the future, study the type of buyer in the store’s area, and only after these basic procedures can you set a price on the price tag of the product.

The effectiveness of the work done can and should be assessed. This especially applies in the year of crisis, when it is difficult to predict in advance the consequences of inflation in the country. But as soon as a product sits on store shelves, you should first of all study the reasons for this, and only then change the price of the product. The reasons can be very different. People do not necessarily visit the store where this or that product is cheaper. A huge percentage of buyers value the quality of the service provided much more than a cheap product. Often, consumer demand for a particular product may increase only because there is little of it left, and the shortage scares the customer more than the price. It is noticed in the retail trade that sometimes a cheap price tag scares off buyers because they begin to doubt its quality.

This is especially true for trading during the holidays, when a maneuver to reduce the price of your competitors’ popular goods will lure a lot of your customers to your stores. Here, according to experts, you need to monitor the slightest movements in the prices of producers of raw materials for consumer goods in your stores.

It is well known that pricing is a change in pricing policy. There are two main pricing strategies in retail: EDLP (every day low price) and H/LP (high/low price), which are used by professional retailers.

EDLP is the setting of a consistently low price (between the constant prices of competitors and average market prices). This strategy is characterized by: low prices on any day; limited number of measures to stimulate demand; reduction of investments in marketing, since there is no constant need to organize events aimed at stimulating demand; lack of a discount program (loyalty program); reducing the difference between price and cost; requirements for high-quality planning of sales and balances. In Russia, this strategy is used by retail stores with a huge, changing flow of customers.

H/LP is a mixed approach to pricing, in which set prices can be either lower or higher than EDLP. Features of the H/LP strategy: profit maximization through price discrimination; the ability to market products to both price-sensitive and price-insensitive buyers; price wars; high level of communication costs. An example of such a strategy can be called “single price stores”: “Everything for 47”, “FIX Price”, where at first glance everything seems to have low prices, but in fact, prices for certain types of goods are twice or more inflated. This is what brings profit to this chain of stores.

In addition to basic strategies, there are many pricing methods that vary by type of retailer. In retail centers of household chemicals and products, price tags are compiled according to costs - these are the costs of transporting the goods and storing them. In shoe and clothing stores, sports goods and automobile stores, it is more advisable to change price tags based on consumer demand. For all types of retail, it is important to focus on the market when working with price tags. This means that we carry out pricing in comparison with the prices of substitute goods and related products. According to expert Eduard Saifullin, such an example is: “The chain of grocery supermarkets “Magnit” operates according to the H/LP strategy. While maintaining a single low price for the main groups of goods, the retailer offers a number of goods with a lower level of demand, but higher prices. A competent focus on demand is obvious, which is also proven by the location of retail outlets (most often in residential areas, in places of average traffic).”

The conclusion suggests itself. There is no single recipe for setting prices in retail. It will always depend on objective and subjective circumstances and factors. There are many of them and they all need to be taken into account as much as possible when forming a retail pricing strategy in order to remain successful in business.

Elena Egorova

Pricing - the process of establishing, regulating prices and monitoring the application of the pricing procedure established by law by legal entities, individual entrepreneurs and other pricing entities.

The legal basis of state policy in the field of pricing in the Republic of Belarus, the scope of application of free and regulated pricing, the powers of state bodies that regulate and control pricing, the rights, duties and responsibilities of pricing entities are established by the Law of the Republic of Belarus dated May 10, 1999 No. 255-3 " On Pricing" (with amendments and additions) (hereinafter referred to as the Law on Pricing). According to Art. 9 of the Law on Pricing, state policy in the field of pricing in accordance with the Constitution of the Republic of Belarus is determined by the President of the Republic of Belarus. The Ministry of Economy of the Republic of Belarus, represented by the Pricing Policy Department, performs the following functions regulation and control over pricing assigned to it in accordance with the law:

develops proposals on the fundamentals of state policy in the field of pricing and ensures its implementation in the republic;

determines the forms and methods of state price regulation, the procedure for establishing and applying prices (tariffs) (hereinafter referred to as prices), as well as the procedure for their declaration, carries out methodological management of pricing, which ensures the unity of pricing policy throughout the territory of the Republic of Belarus;

coordinates the work of other republican government bodies, regional and Minsk city executive and administrative bodies to regulate and control pricing;

carries out regulation of prices for goods (work, services) of pricing entities (legal entities, entrepreneurs), using methods provided for by law;

exercises control over the establishment and application of regulated prices by pricing entities, and their compliance with the established procedure for applying prices;

Price - monetary expression of the cost of a unit of goods.

The pricing process presupposes the existence of a price system: free and regulated. Article 3 of the Pricing Law gives the following definitions:

free price - price determined under the influence of supply and demand in conditions of free competition;

regulated price - the price set by the relevant government bodies that regulate pricing, or determined by the subject of pricing (legal entity, entrepreneur) taking into account certain restrictions established by these bodies. In this case, the regulated price may have a fixed or limit value;

fixed price - regulated price set by the pricing entity in a fixed monetary value;

limit price - regulated price, the value of which is limited by upper and (or) lower limits;

maximum trade markup (discount) - restrictions on the regulated price established by government bodies that regulate pricing in the sphere of circulation;

marginal profitability standard - an established limit on the ratio of profits to costs, expressed as a percentage.

In other words, free prices (contractual, selling, retail and purchasing) are formed depending on the state of the market and are established without government intervention, on the basis of a free agreement between the seller and the buyer. At the same time, for certain groups of goods the state sets an upper price limit, exceeding which is prohibited. In a market economy, such price management concerns vital goods and services (energy, public transport, essential consumer products). Neither manufacturers nor sellers have the right to change them.

Any price for goods is based on the cost of the finished product, which includes the costs of its production and sale.

Selling price - the price set for a manufactured product or for an imported product during its wholesale sale.

Selling prices for goods are formed taking into account market conditions on the basis of planned costs, taxes and non-tax payments, and profit.

Selling prices are formed by the manufacturer, taking into account or excluding the costs of delivering them to the buyer ( on free terms). When purchasing goods from manufacturing organizations at selling prices formed without taking into account the costs associated with their delivery, trade organizations have the right to attribute the amount of actual costs of delivering goods to an increase in selling prices. Costs for the delivery of goods by one trade organization to another trade organization are included in the costs of sales of one of these organizations based on the terms of the concluded agreement. When the buyer delivers goods to his warehouse, the selling prices for which are formed taking into account the costs of their delivery (free destination), these costs are reimbursed to the buyer based on the terms of the concluded contract.

In accounting, concepts such as purchase price, accounting price, and selling (selling) price of goods are distinguished.

Purchase price goods is the price at which a trading organization purchases them from suppliers. It depends on the sources of their supply and the pricing procedure. Wholesale trade organizations receive goods:

at selling prices - from producers of the Republic of Belarus;

at contract prices - from foreign suppliers;

at established selling prices - from importers;

at selling prices with a wholesale markup - from intermediary organizations.

The purchase price of goods including VAT and the cost of packaging at selling prices form the amount to be paid.

Registration price goods - this is the price at which goods and packaging are taken into account in current accounting in the accounts of financially responsible persons. It is determined by the pricing procedure and accounting policies of the organization.

In wholesale trade warehouses and distribution warehouses of trading organizations, the accounting price of goods can be:

selling price of the manufacturer (importer);

single selling price;

the purchase price, taking into account transportation costs and supplier VAT, included in the price of the goods at the time of their receipt and receipt at the warehouse;

fixed retail price, if such prices are set for goods.

Containers for goods and empty ones arrive at the warehouse and are accounted for at the supplier's selling prices, and containers not specified in the sales documents are accounted for at prices of possible sales. Registration prices for goods in wholesale trade are confirmed by price lists and supplier agreements.

Selling price goods- this is the price at which a trading organization ships and sells them to customers. It depends on the discount price of goods and the established procedure for the application of wholesale markups, trade discounts or the established procedure for the formation of wholesale trade prices for imported goods.

Wholesale trade organizations sell:

goods produced in the Republic of Belarus - at selling prices of producers (taking into account additional costs of wholesale trade) with a wholesale markup and VAT or at uniform selling prices with VAT;

goods imported by them from outside the republic on their own - at the established selling prices including VAT;

goods received from importers - at the selling prices they set with a wholesale markup and VAT;

goods for which fixed retail prices are set - at fixed retail prices minus a trade discount.

The selling price of goods and non-returnable packaging including VAT, as well as returnable packaging, constitute the amount payable by the buyer for shipped goods.

Wholesale markup - a premium charged by a business entity when carrying out wholesale trade in goods not produced by it.

Trade allowance - This is a premium set by various trading enterprises. It is intended to cover the costs of retail businesses and generate profits.

Free retail price:

free selling price + wholesale markup + trade markup.

Free retail price structure

Table 2.5

	Indicators	Calculation algorithm	Amount, rub.
	Actual cost of industrial products
	Enterprise production price	page 1 + page 2
	Contributions to the budget
	Manufacturer's selling price excluding VAT	page 3 + page 4
	VAT amount	page 5 × VAT rate / 100 (1,200 × 20 / 100)
	Manufacturer's selling price including VAT	page 5 + page 6
	Wholesale markup amount	page 5 × size of wholesale markup 10% / 100 (1,200 × 20 / 100)
	Selling price of a wholesale enterprise excluding VAT	page 5 + page 8
	VAT amount of a wholesale enterprise including VAT	page 9 × VAT rate / 100 (1,320 × 20 / 100)
	Selling price of a wholesale enterprise including VAT	page 9 + page 10
	Amount of retail trade markup	page 5 × VT size 25% / 100 (1,200 × 25 / 100)
	Retail price excluding VAT	page 9 + page 12
	Retail VAT amount	page 13 × VAT rate / 100 (1,620 × 20 / 100)
	Retail price including VAT	page 13 + page 14

Free retail price: 1,200 + 120 + 300 = 1,620 (excl. VAT) + 324 (VAT) = 1,944 (rub.)

Wholesale and trade markups are an element of the free retail price of goods. The procedure for their application and amounts are set out in the Regulations on the formation and application of free prices and tariffs and additions to it.

The procedure for the formation of wholesale markups and retail prices for goods is established by Chapters 4 and 5 of Instruction No. 183.

On February 1, 2011, Resolution of the Ministry of Economy of the Republic of Belarus dated December 30, 2010 No. 196 (hereinafter referred to as Resolution No. 196) came into force, which introduced numerous changes to the Instruction on the procedure for the formation and application of prices and tariffs, approved by Resolution of the Ministry of Economy of the Republic of Belarus dated 10.09.2008 No. 183 (hereinafter referred to as Instruction No. 183). These changes are related to the signing of Directive of the President of the Republic of Belarus dated December 31, 2010 No. 4 “On the development of entrepreneurial initiative and stimulation of business activity in the Republic of Belarus” and are aimed at ensuring the transition to market pricing mechanisms and non-interference of government bodies in the pricing process of business entities as stated in it. .

In accordance with the changes affecting clause 21 of Instruction No. 183, from February 1, 2011, the obligation of trade organizations carrying out wholesale trade goods of non-own production, charge a wholesale markup of no more than 20% (regardless of the number of participating trade organizations) only in relation to goods listed in Appendix 1 to Instruction No. 183. Wholesale markups on goods not listed in Appendix 1 to Instruction No. 183, are applied in an amount determined taking into account market conditions.

In the same manner, from February 1, 2011, the amount of the added wholesale markup is determined when selling goods purchased from non-residents of the Republic of Belarus on the territory of the republic (except for cases of acquisition by a non-resident seller of goods of foreign origin from a resident).

Resolution No. 196 excluded paragraphs 33 and 34 from Instruction No. 183. As a result, state regulation of the formation procedure was removed retail prices trade organizations - for agricultural products (except for the goods listed in Appendix 1 to Instruction No. 183);

As of February 1, 2011, the rule limiting the 30% markup applied by importers to goods of foreign origin was abolished.

The addition of a surcharge of no more than 30% to the amount of contract prices, customs duties, transportation costs, other costs associated with fulfilling the requirements established by law for the import of goods, insurance costs, interest on loans is retained only in relation to goods listed in Appendix 1 to Instructions No. 183.

Diagram 7. The procedure for setting sales prices in wholesale trade

Diagram 8. The procedure for setting sales prices in retail trade

Business entities are obliged to strictly observe the pricing procedure throughout the entire route of movement of goods - from production to the final consumer (buyer). To do this, it is necessary to control prices.

Preliminary control prices, wholesale and trade markups (trade discounts), compliance with the established procedure for the formation of selling prices, maximum and declared prices, etc. are carried out by employees of commercial and financial services, as well as the head of a trade organization at the time of concluding contracts with suppliers and buyers. Such control is carried out by comparing information about prices from the supplier with current prices on the commodity market, forecasting their changes, pricing policy, etc.

In the interests of carrying out current and subsequent control over prices, supply contracts, price approval protocols, commodity and delivery notes indicate the manufacturer's selling price, the importer's selling price without VAT, the percentage and amount of the wholesale markup, the rate and amount of VAT.

Current control Accountants, price economists, commodity experts, auditors and other trade workers monitor prices, wholesale and trade markups. Price economists in waybills and other commodity documents check the correctness of the indication of selling prices, wholesale rates and amounts, trade markups and VAT, as well as retail prices. The price economist confirms the correct application of prices with his signature in the primary documents. If it is established that suppliers have inflated prices, wholesale markups (understated trade discounts), unlawful inclusion in transportation costs, or errors in calculations, the wholesale organization declares a partial refusal to pay for the documents presented.

Test questions.

Name the conditions on which the accounting of commodity transactions at a trading enterprise depends.

What main accounts are intended for recording commodity transactions in trade, give them a description.

What options do you know for accounting for goods in trade? Give them a description.

Which employees are called financially responsible persons?

Define financial liability.

Under the simultaneous presence of what conditions can an employee be held financially liable?

What forms of liability are used in trade?

In what case can written agreements on full individual liability be concluded? employer and employees?

Name the main responsibilities of the employee and the employer contained in the agreement on full individual financial responsibility.

Under the simultaneous presence of what conditions is collective liability established?

How to recover damages in case of collective (team) financial liability

Name the main reporting forms of financially responsible persons for transactions with goods and containers, the procedure for filling them out and submitting them to the accounting department.

What functions for control over pricing are performed by the Ministry of Economy of the Republic of Belarus represented by the Pricing Policy Department in accordance with the law?

What prices are included in the price system, give their definitions.

How is the selling price for a product determined?

In wholesale trade, how does the purchase price depend on the sources of goods and the pricing procedure?

What prices can be used as the discount price of goods in wholesale trade warehouses and distribution warehouses of trade organizations?

At what selling prices do wholesale trade organizations sell goods?

How is the free retail price for a product formed?

In what order, from February 1, 2011, is the size of the wholesale and retail markup determined when selling goods on the territory of the republic?

What types of control do you know over prices, wholesale and trade markups (trade discounts) and how are they carried out?

Definition 1

Retail trade is the sale of goods and services by the piece, or in small quantities, carried out through retail stores.

Retail Pricing Strategies

Retailers are developing their own pricing strategy for branded and unbranded product groups. The strategy for developing retail prices at a retail enterprise is designed, taking into account the goals and pricing factors, to determine the price range depending on the goals of the store.

Retail pricing strategies need to consider the most important factors:

• recommended base retail price level;
• range of price fluctuations relative to a set level.

The choice of pricing strategy is related to the goals of the enterprise:

• offering consumers exclusive, expensive goods;
• thrift store

Another most important decision in the process of choosing a pricing strategy is determining the type of pricing. Either this is a choice of constant prices or floating prices.

There are several areas of conditions for the sale of goods, for which different pricing strategies are chosen:

• traditional conditions for selling goods;
• new products and stores;
• assortment groups of goods.

Let's consider the traditional conditions for the sale of goods, for which they use either a strategy of stable low prices or a strategy of changing prices

Stable low price strategy

This strategy involves setting not the lowest prices, but prices that are at a constant, stable average level. That is, in contrast to stores that offer prices one level higher, and during sales periods one level lower.

The goal of this strategy is to consolidate in the minds of the consumer the understanding that in this store you can always purchase goods at a stable average price. Such a message develops a certain trust in the consumer, and therefore the buyer visits the store more often, making larger purchases. Which in turn brings the store stability in product turnover, and hence income and profit.

Another advantage of this strategy is that due to the absence of sales, stable prices lead to lower costs for promoting goods and improved quality of service.

Variable Price Strategy

Variable price strategies have gained great popularity in recent years. It consists in the fact that the company sets high prices to create a prestigious image. But at the same time, it holds sales or other events quite often to stimulate consumer purchasing power. To create a prestigious image, a high price is used due to the psychological aspect, which presupposes that the consumer has developed a relationship between the price level and the level of product quality. For the same reason, a low price can provoke a decrease in demand, since for the consumer such a price does not fit into the usual price range for a given service or product.

Note 1

As a rule, this strategy is used either when there is little profit from selling at low prices, or when there is too much competition in the market. Due to high competition, popular companies are reducing the intervals between sales; now they are not only seasonal. Thus, the store is able to sell the product in stages to different levels of customers. When a new product appears, the product is offered at an inflated price, then the price gradually decreases, which leads to an increase in demand and sales growth. The final stage is end-of-season sales, which attract low-price buyers.

Galamart models low prices

The drogery soft-discount chain Galamart calls itself a “permanent sale store” and a category killer. Given the complexity of the price management process and the lack of ready-made solutions, the company developed its own IT program to maintain the image of a store with the lowest prices.

“The buyer’s attention to the price of goods and the positioning of the store has increased. Hence the need arose to build systems for operational monitoring of competitors, forming an idea of ​​the price level and allowing them to respond to them accordingly. Price in Galamart stores is a tool for managing the speed of sales, maintaining strict turnover standards and profitability of goods. Therefore, systems are needed that can model sales dynamics, selecting the optimal price level for a particular item, taking into account the projected profit.”

A signature feature of the chain is seasonal sales. While retail chains, supermarkets and hypermarkets raise prices for seasonal goods, at Galamart the prices for these goods are reduced. Moreover, in the store’s assortment management system there is a formalized process for marking down goods that have unsatisfactory sales dynamics. This mechanics allows, on the one hand, to offer real discounts every day, and on the other hand, it increases the turnover of goods, ridding shelves of illiquid items.

The pricing process is considered by the network taking into account two criteria:

1. how the buyer perceives the price,
2. what is the efficiency and profitability of the business.

When working to find the optimal price, a set of solutions is used: collecting data on competitive prices offline through a mobile application, site parsing (scanning sites to extract the necessary information using a robot program) to collect prices in open sources, aggregation and primary processing of monitoring data based on 1C, business analytics and model building in QlikView, expertise of category managers. Currently, options for using machine learning and working with big data in price management mechanics are being explored.

Data collection is carried out using a mobile application, which allows you to quickly collect information about prices, take photographs of the product and price tag, write a comment on the product (if necessary), and send data to the server. Each store has its own set of competitors, so each store gets its own prices for indicator positions. Monitoring is carried out at least once a month for each group. Each store can request price changes online if a competitor has reduced prices between monitoring periods. The list of goods for which standard monitoring is carried out is limited, but items outside this list also appear.

Automation of the process makes it possible to carry out monitoring of competitors with optimal expenditure of the contractor’s time, and also to eliminate the lack of a product group from a competitor during monitoring.

Data processing takes place on a new platform developed on the basis of 1C:Enterprise 8.2. There are many systems on the market with the ability to quickly generate reports in various sections. The main choice of the Galamart network is the BI analytical platform “QlikView”. At this stage, short-term and long-term planning operations are carried out according to indicators, monitoring the implementation of plans, structural analysis of sales by category, region, profitability analysis: by category, store, in terms of all basic indicators, etc.

“The introduction of this or that tool is intended, first of all, to reduce the role of human expertise, to reduce the level of uncertainty, which always reduces the quality of decisions. Products for a wide range of users (an application for collecting competitors’ prices) did not require serious training, but analysts had to be taught the functionality of QlikView,” adds Oleg Nikolaev, project manager for process automation at the Galamart chain.

The final step is to distribute tasks to performers. All of the above were launched last year and are in the process of continuous improvement. Despite a well-developed pricing strategy, Galamart is purposefully moving towards development.

Deputy Director for Network Development Amiran Ibragimov spoke about the improvements planned in the near future.

– Should we expect the appearance of electronic price tags in chain stores? Is this technology necessary in your format stores?

– The project for introducing electronic price tags in Galamart chain stores has already been put into development. A project working group was formed and work began on collecting information from suppliers and making presentations.

We understand that, given the concept of extremely dynamic pricing, in which about 700 price tags change per week in our stores, the introduction of an electronic format for these media is a vital aspect.

In addition, there is another serious plus - convenience for the buyer. In this regard, we will work out all the nuances, select 1-2 test stores, get preliminary results, make adjustments and come to a decision on implementation and further replication. The forecast for implementation in test stores is the 4th quarter of 2017.

– What are the advantages of implementing a machine learning system in a store? When and how are you planning to implement the project in the Galamart chain?

– We are currently studying the issue of introducing machine learning based on working with neural networks, and the automation department is already busy with the project of using this breakthrough technology in terms of pricing. This is a very important block in the work of any retail chain, and we believe that machine learning will help find those hidden resources that simply cannot be identified using the manual labor of employees.

If we talk about the timing of implementation, now “Galamart” is at the primary stage, when information is being collected. The actual testing in the first 5–10 stores is planned to begin in the 1st quarter of 2018. By the end of 2018, we want to reach the stage of full implementation of this technology specifically in terms of pricing.

– What, in your opinion, are the key factors for the successful development of the Galamart chain?

– The work of our network is based on four principles:

1. Low prices every day (Every day low price). The buyer can always find products with fair discounts and products with unique promotions. For example, “All for 9-19-29-39-49.”
2. New items every day. At Galamart, the assortment is constantly updated, and many new products appear every 2 weeks.
3. Successful work with seasons/micro-seasons. The stores always have products that meet the current needs of customers.
4. Working with goods of impulse demand.

The economic model of the network has been tested on a large number of projects. Payback on capital costs is achieved in 1–2 years. There are cases where the payback was less than 1 year. The launch of a new store takes place within 60 days - the period that passes from the moment the commercial concession agreement is signed until the festive opening. This includes all stages, including renovation of the premises.

The federal franchise retail network, operating in Russia since 2009, includes more than 170 stores. The main product groups presented in the stores: dishes, haberdashery, household goods, goods for children, gifts, auto products, tools, household chemicals, cosmetic products, goods for animals, for sports and recreation, office supplies. About 70% of the assortment consists of imported products from China, India and Brazil, 30% - Russian producers.