Hardware Retailing

SEP 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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Page 54 of 118

HARDWARE RETAILING | September 2017 50 The Challenge If you don't regularly review your retail prices, you are likely missing margin opportunities. That's what Matthew Payzant realized when he started looking at special orders and noncommodity building materials. Payzant is general manager of the family business, Payzant Home Hardware Building Centre, with five locations in Nova Scotia, Canada. The business carries core hardware, along with a full breadth of lumber and building materials. For many items, his wholesaler helps him by updating the recommended retail prices so he maintains a healthy margin above the wholesale cost. But there is another group of items he buys either directly from the manufacturer or through various building material suppliers. Members of Payzant's purchasing team are responsible for setting the pricing on those items, and that's where opportunities can arise. When manufacturers increase their prices, it's easy to miss out on increasing retail prices in response. The cost-of-goods increases are often gradual and occasional, so sometimes they don't get noticed, but they erode retailers' overall margin. "There are items where the prices have continued to creep up, but we hadn't always taken the time to check the retails and adjust accordingly," he says. Payzant's special-order process presented similar opportunities. There was not enough consistency in pricing special-order items. "If you went into one of our stores to place a special order and asked five different sales employees the price of a custom door, you might get five different answers," he says. Besides confusing customers, it also meant the business was losing margin. A few missing margin points here and there eventually add up to a lot of missed profits. Payzant needed a way to keep a closer watch on prices, especially in a larger operation where multiple staff members are handling special-order transactions every day. While Payzant runs a lumber business, his strategy for dealing with pricing is applicable to retailers of any size and product mix. A disciplined approach to pricing means you will be making the most of the profit opportunities available to your business. The Solution Payzant needed to address noncommodity building material items and special orders. Noncommodity building material items are less price-sensitive than commodity items and can provide more margin opportunity. In this category, there were some slow-moving items where retail pricing hadn't changed in a long time, even if his cost had gone up. To keep his retails at the appropriate level on these noncommodity items, Payzant instituted a systematic approach to reviewing prices twice a year. He creates a list of all of the items he wants to review and breaks them Regular Pricing Review Matthew Payzant found opportunities to increase margin by taking a more disciplined approach to pricing. Numbers to Watch Cost of Goods Gross Margin

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