Question

Topic: Strategy

E-commerce To Retail: How And How To Price?

Posted by Anonymous on 1/5/2008 at 1:42 PM ET 250 Points
Facts:
1) Business is good for our very small online store that sells a unique product.
2) We are getting inquiries from stores to sell our product. One store contacted US.
3) We've established a selling price on line, but are unable to give a 40% share to retail shops. We manufacture in the U.S., which is pricey.
4) Our product sells for $26.98 - $30.98 + shipping/handling and tax.
5) Have generated considerable buzz amongst our target audience - customers are touting our product and selling it for us!
6) We currently manufacture a couple of hundred pieces a year so we can't get volume manufacturing pricing.

Do we:

1) Raise the price of our product 40%? (wouldn't work)
2) Try to convince retail store owner to raise his price to sell for what our customers pay with shipping plus slightly more?
3) try to find a cheaper manufacturer overseas?

We tried option #2 and the store owner agreed to try a limited amount (12 pieces) of our product.

He was very reluctant (was sincere and said he understood our dilema) until I told him:

1) Our customers continue to ask to purchase our product in a store where they can get it immediately (even though our shipping delivers product in 2 days-customers are amazed!) and where they can physically try the product.
2) Over 30% of our customers are from his area.
3) We offer a beautiful display stand that allows customers to try all sizes of our product - but he's not using it.
4) We will advertise on our website where to buy retail - his store, with directions and link to his website.

(This store owner contacted us after one of his customers raved about our product - and the store owner said he will even be using it in an upcoming tournament.)

***How can we market to stores in our situation? ***
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RESPONSES

  • Posted by CarolBlaha on 1/5/2008 at 1:45 PM Member
    Its the same dollars if you raise your prices or the retailer raises his. there is a price point that consumers are willing to pay. If you have exceeded this point-- then you must find a way to reduce your costs to give the retailer his profit, and the consumer his price point. No matter how wonderful the product-- no retailer will carry it if it doesn't mean profit to him.

    Sell Well and Prosper tm
  • Posted by Inbox_Interactive on 1/5/2008 at 1:51 PM Member
    It's hard to say what you should do without knowing what the product is or what its total market potential is.

    If you need retailers to achieve your fullest potential, then it sounds like you're going to have give up some margin for the additional volume.

    Additionally, if you need retailers to achieve your goals and you still plan to sell online, you'll have a channel conflict. As you know, some retailers will be apprehensive to take on your product when you're going to be out there selling against them.

    There are manufacturers who sell via retailers and their own websites, but these often tend to be larger companies where the retailer needs them as much or more than the manufacturer needs the retailer.

    I don't know that anyone can really come up with the right answer without knowing a little bit more about the product and how it's typically learned about, researched, bought, and sold, etc.

  • Posted by mgoodman on 1/5/2008 at 3:04 PM Accepted
    My solution would be to increase the shipping/handling charge by a few dollars, so that the price of buying direct/online is higher; and encouraging dealers to price at parity (or a little more) with your total delivered price.

    The dealers are providing a value added service -- immediate delivery, ability to touch/try/feel/see the product. They shouldn't be concerned about having a retail price that's a little higher than your direct price.

    Because you can't increase production easily, you're in the great position of having more demand than supply, so a small increase in effective price shouldn't be a major risk. You may be more concerned about the price point than you need to be. Do you really think that if your product were priced $3-5 higher that your market would refuse to buy? Unlikely.

    Obviously, each market and each geographic area is a little different, so I don't claim to be an expert in your specific situation. But I've been through a lot of pricing strategy issues very similar to yours (in different industries, including sport fishing/hunting), and I'm pretty confident that a lot of your price sensitivity concerns are overstated (in your mind).
  • Posted on 1/5/2008 at 10:04 PM Accepted
    Ok, first of all, I want to see your product. My brother goes fishing about everyday...he lives off Lake Fork in Texas. He had a similar idea (at least from what I can tell by what you have said) but he has more enthusiasm in fishing than in inventing, so it never went anywhere.

    Here is my two cents: You say you have a UNIQUE product. Meaning there are not alot out there, if any (again, I want to see it because I AM familiar with this market to some degree) If in fact it IS unique, a premium price along with the right marketing may just do the trick. There are several avenues to go, and if you are worried about losing your current customers, than it may not matter, but unless you think that repeat business will get you to your goals, then listen up...

    Bass Pro Shops...Cabela...etc, you get the idea. Get your presentation together and make your pitch. Get your pricing data that will show exactly where those discounts occur. Yes, GET pricing from overseas, that is where your HUGE money is, no question. If you are a MADE IN THE USA business, then I respect that, but that can be tough unless you have a boutique item and can get away with selling just a few, for LOTS of money. If you are selling to the sports enthusiasts, then yes, price can be a major determining factor. If you can get a plastic injection molding done overseas (again, I don't know your product so this mention is just a generalization) maybe work those costs into your initial order, back the price down by about 50%, then you will have the negotiating power you need for local retailers, but like i said, I would forget about that and go big time. Heck, if it is truly unique, and will present well, and you can really get that price point and margins where they need to be, go make your pitch to QVC . This is a PRODUCT we are talking about at this point (from what I know) not a STORE, or even a business. A business CAN be made from just a product but it is tough...you are finding that out now. If you can get this into the hands of the big boys and push volume, you are good to go! Again, if this IS a unique product, and it is a good one, there will be imitators. And they WILL go big time...my advice would be to attack the market strongly and get a foothold before the imitators come around. Even if you have a patent, a slight change in the product can often get around this, and even if it is a direct knockoff, and they hit the big time with YOUR product, some companies will challenge that you won't have the power or money to hold them off with the lawsuit...that is why I am saying GO BIG OR GO HOME!! :-)

    I would love to help you with organizing a plan of action if you want any additional advice. I work with companies in developing new products and/or services and get them to market, and I would certainly be willing to offer some free advice/help just for the possibility of being a part of your success story...either way, good luck, and send me your website [Email address deleted by staff. This belongs in the Member Profile Thanks!
  • Posted on 1/5/2008 at 10:49 PM Member
    Consider whether you can make slight changes to the one that will be sold retail from the one sold online. If that is possible the prices can be a bit different.
  • Posted by Inbox_Interactive on 1/5/2008 at 10:54 PM Member
    Oh, one other thing...let me know if you'd like a contact here:
    https://www.skeeterboats.com/

    They have a pretty good email list.
  • Posted by Jay Hamilton-Roth on 1/7/2008 at 9:30 AM Accepted
    What's your longer-term business goal? Is it to grow the company? Sell it? Maintain it at current size/sales numbers?

    I'm assuming that you're successfully selling all your inventory right now. If so, then why have a local store sell it at all? If you're trying to increase production, then you need a way to ramp it up. You need to hire someone to analyze your current manufacturing to increase efficiency. It may be better to offshore manufacturing, or purchase partially assembled goods from other vendors, etc.

    You're currently in a "sweet spot" - customers as fans, and demand is being created without additional work on your part. However, you now need to plan wisely, otherwise you'll be forced to choose your future defacto.
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