Improve Margins
As a generalization, dive store owners tend to focus primarily on the profit margins associated with big ticket items, such as BCs and regulators. Analyze your products sales, however, and you will likely discover that it is smaller items, such as masks, snorkels, fins, t-shirts, coffee mugs and dive lights, that may account for the majority of your sales.
Now ask yourself, to what degree does price play a factor in whether or not these products sell? The answer is, not as much as you might think. Granted, few customers will buy a $41.95 t-shirt; however, if the difference in price is between $18.95 and $19.95, that extra dollar will have little impact on whether or not the item sells.
Bear in mind the following:
- Consumers seldom comparison shop price on items costing less than $50 to $100. They also have little idea what the MSRP is for these items.
- For items in this price range, factors such as color, size, selection, convenience and immediate availability may play a larger factor in a consumer’s willingness to buy than price will.
- Even if you operate on a gross margin of 50 percent, your net profit before taxes on product sales — once you pay for shipping, salaries, commissions, rent, heating, lighting, air conditioning, insurance, etc. — may be as little as five to ten percent (if you are lucky).
- If you increase the selling price of an item by as little as five percent (say, from $18.95 to $19.95), you may as much as double your net profit before taxes on product sales.
Re-assess how you price the products you sell. There is nothing that says you can’t sell for more than the MSRP — particularly on items for which price has little impact on product sales. Why not take advantage of this fact?
Even if raising prices has a moderately detrimental effect on overall sales, consider the net effect. If increasing prices doubles your net profit before taxes, sales can decrease by up to half before you stop coming out ahead. It works for brands such as BMW and Mercedes — why not for you?
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