May 25/June 1, 2015; Volume 29/Number 4
By David Romano
The element of surprise is a wonderful thing when the outcome is one that brings satisfaction to both parties. But is it really such a wonderful surprise to find out what something costs only after you show interest and get excited about the possibility of having the perfect handscraped wood floor? You may just find out that what you fell in love with was so far out of your price range that the only immediate purchase you have in mind is a bottle of water to wash down the bitter taste.
The practice of not pricing your retail floor is sure to disappoint and, surprisingly, is still carried out by many flooring retailers. Imagine finally sitting down at the new restaurant you have been dying to try, only to find out there are no prices on the menu. Wouldn’t that be a bit uncomfortable and confusing? Would you like having to ask the server how much each item costs and risk the possible embarrassment of not being able to afford what you really want to eat? Even if the prices provided a value, what is the likelihood you would come back? Slim to none? How long do you think that restaurant would be open? If this practice would never work for a restaurant, what would make one believe it would work in the flooring industry with a purchase that will most likely be the third largest a consumer will ever make?
With all of those questions there must be answers. According to a substantiated survey conducted by Benchmarkinc in which several hundred flooring business owners participated over a three-year period ending 2013, independent flooring stores that have their showrooms priced versus those who did not:
- Were nearly twice as large;
- Had a higher gross profit, 35.8% versus 34.6%
- Generated a higher average ticket, $2,254 versus $2,142
- Each sales associate generated nearly $66,000 more per year
- Owners earned just over $39,000 more in annual income
- Close rates were identical; 45% respectively
When it comes to pricing, there are some variables to consider. First, it is best to price by the square foot, not the square yard. Only you know how the product is ordered so only you should speak in another language. Second, consider pricing of material only vs. installed. The most common practice is material only, but the method that generates the highest overall gross profit on jobs requiring labor is installed.
Some retailers have adopted the concept of “compare at” pricing in which their prices are compared to a suggested retail or their competitors’ prices. This strategy allows the sales associate a platform to highlight the inherent value of shopping at his store versus the competition. At the same time it provides an imprint in the mind of the consumer that the store is value focused. This is the practice used at the flooring department at Nebraska Furniture Mart; one would have to believe if this is a strategy used by Berkshire Hathaway and Warren Buffett then it would lean toward being effective.
I am all about the element of surprise, except when it involves what I am required to pay for something; I feel I am in the majority when it comes to pricing transparency. If someone is not confident enough to put his prices on his products, why would I want to buy from him?