Oversights you should avoid when deciding on wholesale prices
Oversights you should avoid when deciding on wholesale prices
Wholesale price is a price of the goods purchased by manufacturers, retailers etc at discount rates in bulk quantities. Setting a wholesale price is a very sensitive topic as your whole business relies on it. A business with a good pricing policy earns success by increasing its customer's base and suppliers etc and on the other hand, bad and wrong pricing policies can even result in the closure of the business. So realizing the sensitivity of pricing, one should be very careful and diligent in setting a correct wholesale price. A correct wholesale price is usually the one which covers all the fixed and variable costs of a wholesale business, which should not be more than the different wholesale prices prevailing in the market and should include a reasonable profit margin. In addition to that, there are some oversights which a wholesaler must avoid in deciding a correct price for his wholesale business.
First of all, wholesalers should know that their price should be approximately half of the retail price. In order for the retailers to buy from you, they should be able to at least double the wholesale price which you have charged from them. If your wholesale price is more than half of the retail price, retailers will not prefer to make business with you. Secondly, wholesalers should avoid selling to the customers at different prices. Once you set a wholesale price, charge same from all the customers otherwise it will create discrimination. But it's obvious that you can offer special discounts to your regular customers.
Thirdly, wholesalers often set the prices without entering into market research. This is a big mistake from which wholesalers suffer a lot. You should keep an eye on your competitors and decide your wholesale price according to them. If your wholesale price is greater than them, you should cut your overhead expenses and should try to gain control over your fixed costs. Fourthly, sometimes wholesalers don't realize the quality and worth of their products and to gain more lucrative and big deals they set their prices so low that it becomes a loss to them. So your wholesale price should be neither too high nor too less.
Fifthly, wholesalers often don't change their prices for long and keep them on the same level due to the fear of losing the customers. They ignore the changes in the costs and competitive environment not realizing that price setting is an ongoing process. Sixthly, wholesalers set their prices without forecasting their competitor's reactions. Their competitors are always observing them and they respond to your actions accordingly. So wholesaler should keep in mind their probable responses and then try to fix their wholesale prices.
Wholesalers should keep in mind the above mentioned oversights in order to avoid entering into wrong wholesale pricing decisions. Maintaining a stabilized wholesaling price is an important source of competitive advantage and increased profitability.
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