Mitigating price hikes while holding margins

Home Column Mitigating price hikes while holding margins

Price increasesFloor covering retailers are facing a host of issues today. First and foremost, inflation. Then there are issues with product availability, shipping delays and, now, rising fuel costs. Many are asking, “Do I pass these expenses on to my customers?” Furthermore, “How do I maintain my margins?” We’ve all dealt with price increases in the past, but not at this pace. How do you handle this with your customers? How do you address rising shipping costs? How do you explain multiple material price increases over a relatively short period of time? How do you charge so much more for installation? Let’s tackle some of these issues head on.

First, do you maintain your margin or do you just maintain the dollar of profit you are earning? (If you don’t know the difference between a markup and a margin, check out my YouTube video, “Profit Now with Jerry Levinson Margin vs. Markup.”)

Here’s an example:

Let say you are selling luxury vinyl at a 40% margin. Cost of $2.99 @ 40% margin = $4.99/ft.

Your supplier just raised the price to $3.29. Cost of $3.29 @ 40% margin = $5.49/ft.

Or you can maintain dollar profit. Cost of $3.29 + $2 = $5.29/ft. That sounds good and fair for your customer, but if you continue doing it that way it will quickly catch up to you to the point where your margin shrinks. You will experience higher costs on everything in your store and, if you don’t maintain your margins, you will go out of business.

Next is the issue of rising costs. How should you explain these higher prices to your customers? Some suggestions:

  1. Your customers are fully aware of the inflation that is affecting all products they wish to purchase—not just flooring.
  2. Actually, you really don’t need to explain because most consumers don’t know what the price was before or what your competitor sells it for. They may be researching online but very few companies display pricing of any sort online.
  3. If you are hearing objections from your customers then you need to be prepared on how to answer them, just as you need to be prepared to overcome any other objection.

What about the rising cost of shipping? Is it right/fair to pass these costs along? The short answer is yes. Remember, the cost of goods is the price of the material plus shipping and handling. The reality is we can’t get materials without shipping or delivery. Some flooring dealers will line item this expense, but that really isn’t necessary because it is part of the cost of the material.

Conversely, some might ask, “If the economy slows down, should I lower my prices?” I say absolutely not! I see many flooring dealers do this as a knee-jerk reaction to a shrinking economy. If you were to lower prices, then how will that attract customers? Without marketing your lower prices they won’t know. Marketing low prices doesn’t work well for attracting customers. You will find that customers come to you mostly for convenience, or they saw your ad multiple times so they become familiar with you. Or perhaps they were referred.

On the subject of maintaining margins amid higher prices, I recommend learning how to better market your business to attract your ideal clientele. Learn how to create a great sales presentation to close more sales at a higher price. Learn how to hire and train your sales team to be successful, maintain a high closing rate and get great margins.

Remember, your job is not to save your customers money. Your goal is to do a great job by providing an exceptional customer experience and charging accordingly for that experience. If price is the customer’s main criteria, then you probably wouldn’t have gotten the job anyway.

Jerry Levinson is the founder of the Flooring Dealers & More Facebook group, and he hosts the Flooring Business podcast. He recently sold his retail business, Carpets of Arizona, and is now offering consulting full time, including weekly sales training, a Master Class and the Flooring Business Accelerator Program. For more, visit

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March 7/14, 2022

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