Deck 14: Retail Pricing

Question 1

What types of retailers often have high/low pricing What types of retailers generally use an everyday low pricing strategy How would customers likely react if a retailer switched its pricing strategy from one to the other Explain your response.

Answer 1

Pricing is very important in retail industry. The prices of the products play an important factor in selling the products and attracting the customers towards the seller.
The types of retailers who deal in bullion market selling gold, silver and other precious items often use high/low pricing strategy. Even the retailers selling fruits and vegetables, gasoline, etc. use high/low pricing strategy depending upon the season, week, or special events that affects sales of these types of products. The availability of these products and its demand makes the prices of these products high and low.
However, the retailers who uses everyday low pricing strategy are the ones who want to bring in major footfall of customers on a regular manner. The supermarkets, hypermarkets, and grocery stores are the ones who uses everyday low pricing wherein they offer most products at low prices so as to attract the customers and to increase the sale of its products.
If a retailer would switch its pricing strategy from one to the other, then the customer would not react in a welcoming manner, instead the customer would become eager and inquisitive to get informed the reason for price fluctuation. There is a possibility that the customer might switch to another brand or retailer in order to avoid paying more for the products that are offered at a higher price by the retailer

Question 2

Why would sewing pattern manufacturers such as Simplicity, Butterick and McCall's print a price of $12.95 (or more) on each pattern and then two times a year offer patterns for sale at $1.99 each How could this markdown influence demand, sales and profits

Answer 2

Sewing patters are marked down twice a year to move inventory and make space for new designs.  The seasonal nature of patterns can impact demand.  Some consumes will wait for a sale and the stock up.  Others will be excited to see what's new and purchase patters at full price.

Question 3

Why would retailers risk violating any of the legal issues discussed in this chapter such as predatory pricing, price fixing, deceptive pricing, bait and switch, or discriminatory pricing Explain your answer.

Answer 3

Students should consider the following in their response:
Price Discrimination: Vendors cannot charge different prices to different retailers unless the cost of manufacture, sale or delivery resulting from different selling methods or quantities sold are different. Resale price maintenance: This issue has had a checkered history.  Currently, however, it seems that vendors can terminate retailers who refuse to maintain suggested retail prices. Horizontal price fixing: It is illegal for competing retailers to conspire to fix prices. Predatory pricing: It is illegal to establish retail prices that are so low that competition is driven from the marketplace. Price Comparison: It is illegal to promote merchandise that is "on sale" from a "regular" price unless the retailer usually and recently has sold the merchandise at that price.

Question 4

Re-read Retailing View 14.2, "Hey, Wanna Buy a Ticket " Describe how supply and demand can impact the price of tickets for sporting events, concerts, and other entertainment. How does the secondary online ticket market impact consumers and the original ticket sellers

Question 5

What is the difference between bundled pricing and multi-unit pricing

Question 6

Note: For questions 6-10, you may use the Online Learning Center. Click on "pricing."
A department store's maintained markup is 38 percent, reductions are $560, and net sales are $28,000. What's the initial markup percentage

Question 7

Note: For questions 6-10, you may use the Online Learning Center. Click on "pricing."
Maintained markup is 39 percent, net sales are $52,000, and reductions are $2,500. What are gross margin in dollars and the initial markup as a percentage Explain why initial markup is greater than maintained markup.

Question 8

Note: For questions 6-10, you may use the Online Learning Center. Click on "pricing."
The cost of a product is $150, markup is 50 percent, and markdown is 30 percent. What's the final selling price

Question 9

Note: For questions 6-10, you may use the Online Learning Center. Click on "pricing."
Men's Wearhouse purchased black leather belts for $15.99 each and priced them to sell for $29.99 each. What was the markup on the belts

Question 10

Note: For questions 6-10, you may use the Online Learning Center. Click on "pricing."
Answer the following questions: (a) The Limited is planning a new line of leather jean jackets for fall. It plans to retail the jackets for $100. It is having the jackets produced in the Dominican Republic. Although The Limited does not own the factory, its product development and design costs are $400,000. The total cost of the jacket, including transportation to the stores, is $45. For this line to be successful, The Limited needs to make $900,000 profit. What is its break-even point in units and dollars
(b) The buyer has just found out that The GAP, one of The Limited's major competitors, is bringing out a similar jacket that will retail for $90. If The Limited wishes to match The GAP's price, how many units will it have to sell