Marketing Makeover for Dealers and Resellers: Part VII, The Numbers Game of Pricing

Pricing merchandise is a vexing process for many antique dealers and resellers. Perhaps it’s the math or not understanding how to recoup expenses. In the end, many dealers simply price and pray!

The truth is that pricing can be difficult, and you don’t want to be cavalier. There are important points to consider, with no magic formula that simply says, “add X to your wholesale cost, and you’ll be in great shape.” Like everything in marketing, pricing requires strategic thinking.

A High-Level View of Pricing

Effective pricing involves examining your costs, merchandise, the marketplace, and the competitive landscape. Despite what you might think, it’s not a race to the bottom to offer the lowest price. Moreover, price isn’t your only competitive ingredient. Every marketing element—from what you sell, where you are located, to your level of customer service—helps spark purchases.

How Wholesale Costs Impact Pricing

One of the biggest impacts on your prices is your wholesale cost. Most everyone knows the adage of “buy low and sell high.” Yet, buying right is so critical for your profitability that it warrants its own marketing mantra.

Marketing Mantra #7: You make your money going in!

Obviously, you can’t sell merchandise below your cost and stay in business. Yet, many dealers do almost the same by overbuying, then selling items near break-even or with negligible profits. You also can’t rectify overly expensive wholesale merchandise by pricing it higher than the market will bear. Simply put, to sell right, you must buy right!

Anecdotal research suggests that antique dealers need at least 2.5-3x their wholesale costs to make this business work. However, that doesn’t mean simply taking whatever you buy and selling it for twice or three times what you paid for it. That’s often a recipe for pricing yourself too high. It’s essential to know the prevailing value of your products. Thus, if you were considering a particular item that you are reasonably confident would sell for $250-$300, you know you can’t pay more than $100 for it. If you pay significantly more, you won’t cover your expenses.

The Limitations to Cost-Based Pricing

Ultimately, your retail prices do not exist in a vacuum. One of the biggest problems with focusing on costs is that it does not consider the reality of the marketplace. Remember the “C” of competition? Your prices should reflect the competitive landscape. Existing prices echo what is possible in your market. If your prices are under prevailing lows, you’ll probably lose money. If they are too high, buyers will likely go with someone else’s offerings.

Sell Fast or Sell for More?

Resellers face another balancing act when setting prices. That is, deciding whether to attract buyers with low prices or hold out for bigger profits fueled by higher price tags. A principle in the retail industry known as “inventory turnover” helps address this concern. Simply put, inventory turnover points to the advantages of making a fast nickel rather than a slow dime. Consider the following illustration:

You acquired a vintage table for $100 wholesale. You know the table will easily sell for $200 or as much as $300 if you are assertive. At $200, the table will sell within a month; at $300, it might take three months to sell. So the question is, do you price the table at $200 and make a quick $100? Or, do you hold out for a profit of $200 even though it might take ninety days?

If you sell quickly, your capital is available again to buy more merchandise and make subsequent profits. In principle, if you recycle your capital on similar deals each month, you would generate $1,200 with your invested capital ($100 profit x 12 months). On the other hand, if you keep your money tied up, waiting for the bigger windfall, you can only turn over your capital four times. So on those types of deals, you only generate $800 ($200 profit x 4 times). Thus, selling at a lower cost speeds up the rate you make profits.

Major Pricing Strategies

While inventory turnover is important, retailers apply it in tandem with other pricing approaches. Each has its benefits.

The first is economy pricing which emphasizes low prices. To sustain a low-price focus, sellers seek low-cost, often low-grade merchandise. This is a tactic used by many flea marketers.

The second is known as penetration pricing. It’s a short-term strategy pairing low prices with high quality. The intent is to get buyers in the door and familiar with one’s business. Once the company establishes traffic, they typically revert to prevailing prices. When first opening, an antique store might use this approach to get its name known.

Skimming puts premium prices on lower-quality goods, thus maximizing profits. You often see this at antiques shows where dealers attach conspicuously high prices to items. They know that the exhilaration of the event often spurs buyers to pay higher than typical value for merchandise.

Finally, there’s premium pricing that matches high-end merchandise with commensurate pricing. You commonly find this in stores and galleries catering to upper-income clientele willing to pay top-dollar for prestigious items.

Know Your Buyers as Before You Set Prices

The strategies outlined above indicate that your pricing strategy should align with the type of customers you serve.

Some buyers are price conscious and motivated principally by how much they pay. Among this group are other dealers who are purchasing to resell. If these are your typical buyers, you want to keep things as economical as possible.

Next are value-conscious shoppers concerned with the long-term value of their purchases. Price is not as important as brand recognition, reliability, and durability. Cater to this group with quality merchandise and reasonable pricing.

Lastly, are prestige-sensitive buyers looking to edify their image and status through what they own. Again, your concern with them is not the price tag but the pedigree of the merchandise it is attached to.

How to Increase Desirability Through Psychological Pricing

Outside of your overall pricing strategy, you can employ small pricing maneuvers that will make select items more attractive to buyers. Many of these approaches generate higher profits.

Promotional pricing: employ tactics like discounts, sales, and coupons that appeal to price-sensitive buyers.

Odd/even pricing: use odd figures like $2.99 that create an artificial price perception (i.e., buyers perceive 2.99 as the “$2 range” instead of $3). Conversely, a “clean” price like $5 often incites buyers, particularly at shows where people use cash.

Multiple unit pricing: package multiples of the same item together to spur a higher combined sale (e.g., sell a pair of beer glasses for $8 rather than the $3 you could get individually).

Bundling: put associated items together to create higher perceived value for the package deal. This appeals to those motivated by value (e.g., a dealer groups a vintage drafting board with a T-square and triangle for $50).

Splitting: take items that are typically grouped and separate them into individual lots. The aggregate value becomes higher than for the group (e.g., rather than selling a set of 80 photo slides for $25, break it into eight sets of 10, each priced for $7.99)

Captive product approach: sell the main product for an attractive price, but price add-ons or supplies separately at premium prices (e.g., original Atari video game console is priced economically at $30. But the controllers, joysticks, and game cartridges are all sold separately).

Sometimes Price Increases are Necessary

Price increases are often necessary to compensate for the economic environment or increased costs. For example, this was written in March of 2022, and gas prices just passed a national average of $4 per gallon. That is a very real expense for dealers, given the amount they drive. Eventually, they will have to pass along that increased cost in higher merchandise prices.

---

William Flood is a mid-century antiques dealer and writer specializing in twentieth-century commercial culture. He writes for numerous antique and collectibles publications on subjects like roadside architecture, 1950s modernism, and even vintage tiki culture. He is the author of two Ohio local history guides. When not writing, you might find him enjoying a small-town Main Street or taking the great American road trip.

WorthPoint—Discover. Value. Preserve.

The post Marketing Makeover for Dealers and Resellers: Part VII, The Numbers Game of Pricing appeared first on WorthPoint.