Pricing by the retailer

In a succesful business, prices are set to cover total costs plus some margin of profit. In a retail business, two costs are associated with the product: the ‘cost of goods’ and the ‘operating costs’.

The ‘cost of goods’ includes the price paid for the merchandise plus freight, import duties and any handling costs.

The ‘operating costs’ include wages, advertising, management salaries, rent, utilities and office supplies.

There are three main pricing techniques for a retailer

  1. Mark up
  2. Follow-the-leader pricing
  3. Below-market pricing