Jeweller - August 2022

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Retail Pricing Guide | FEATURE
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value of that product, and when a retailer makes a product too
cheap you’re cheapening the brand of the business in the process.
Tough task for jewellers
Establishing the correct pricing strategies can be more
challenging in the jewellery industry for a range of reasons,
including issues of transparency on the factors that go into
calculating the final value of a product.
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H YPO-A LLERGE NIC
C OMFOR T ABLE
Nationwide Jewellers represents more than 500 independent jewellery
stores across Australia and New Zealand. Managing director Colin
Pocklington says educating members on the importance of precision
in pricing became a major focus many years ago.
“Around 20 or so years ago we recommended to all members that
they implement a higher pricing strategy,” he says.
“This was in response to increased operating cost, specifically with
rent and labour as a percentage of sales.
“A pricing strategy needs to be based on the businesses financial
model, so that the resultant gross margin percentage will result in
a gross profit percentage that is within industry benchmarks, and
importantly, after covering all overheads provides a profit before tax [as
a percentage of sales] that will give an adequate return on investment.
Pocklington says that since education around product pricing
became a priority, Nationwide has explored options for best
communicating the information with members.
“Our benchmark surveys revealed that many members were not
achieving an adequate profit as a percentage of sales. “We also
introduced our Repair Price Book, as the vast majority of members
were not charging enough on repairs,” he explains.
“Prices in the book are ‘scientifically’ calculated and based on
labour and material costs, and the number of minutes required for
each type of repair. We issue a new book about every two years, or
annually if needed, based on changes to material or labour costs.”
So, with the importance of accurate product pricing firmly underlined,
it’s time to explore some of the most valuable strategies.
Cost-based pricing
Cost-based pricing is by far the most common strategy employed
by retailers. It’s a tactic that is easy to implement and given a
healthy sales volume, all but guarantees a profit.
A retailer calculates the total expenses associated with operation,
including direct material cost, direct labour cost, and other
overheads, and then adds an additional percentage to the final
sales price to ensure that a profit is returned.
Competera contributor Vladimir Kuchkanov explains “such a
pricing strategy ensures that a company receives a profit margin
that meets the anticipated rate of return.”
“Cost-based pricing is widely used because of its simplicity and
the degree of information required to anticipate the profit.
(02) 9417 0177 | www.dgau.com.au