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Increasing Obsolete Pricepoints Takes Nerve

Monday March 21st, 2011 - 7:13AM


If you think it takes a lot of nerve to ask people to pay more for everyday housewares as they brace for $5 a gallon at the gas pump, you might want to stop here.
Intrigued? Read on.
At the risk of dousing the glow of what was the most business-stimulating International Home + Housewares Show in a number of years, the pricing pressure on this industry threatens to choke its momentum without any extra assistance from the latest oil scare.

Careful Consumerism

Retail pricing objectives in housewares are obsolete. The business is long overdue for a cooperative effort among vendors and their customers to do something about it.
Of primary concern should be that rampantly escalating raw material, energy and labor costs are forcing suppliers to adjust manufacturing specs to continue satisfying retail assortments that have been divided into ingrained pricepoint slots. Confidence remains tenuous as shopping enthusiasm swells in this rebuilding economy. The new foundation of careful consumerism is still setting, and it could be undermined easily by diminished quality just to keep hitting all those “magic” pricepoints.
The industry’s bag of tricks is emptying when it comes to absorbing soaring production and distribution costs. Then it’s only fair that everybody should have to pay a little more. The manufacturers. The vendors. The retailers. And the consumers.

Perception Is Reality
Retailers often seem to be operating under a premise that moving a basic mop, for instance, from a pricepoint of $9.99 to $10.49 could bring the basic mop market to a screeching halt. Nobody is willing to put it to the test. The perception continues as the reality.
So we have a game of chicken between vendors and retailers on price increases with retailers often unwilling to flinch on pre-set pricepoint thresholds that many would argue settled considerably lower than they needed to be.
Consumers don’t create pricepoint expectations. The trade does.
Nobody is advocating an outrageous jump in basic pricepoints that would stun shoppers. But it is time for retailers to ease everyday pricepoints upward, more in line with the cost of goods and services. Mounting industry pricing tension could be relieved now to prevent sudden, severe snaps in the supply chain later.

Fair Value
The housewares industry is at a crossroads where it can’t reduce costs further without reducing quality; and where it can’t increase function further without increasing prices. Take the latter.
Bells and whistles are fine as long as they’re not distracting consumers from shortcuts taken to sustain outdated retail pricing norms. Rising costs are the opening for inching up the everyday retail price bar in this business.
Turn the talk from price increases to delivering better products and letting everyone— suppliers, retailers and consumers alike— get fair value for them.
Most consumers have no clue about everything that factors into the retail pricing of any given product. They also don’t know how good they have had it for years when it comes to sinking pricepoints for basic housewares.
They’ll still justify slightly higher pricepoints for reliable quality before they justify lower-quality product… if you have the nerve to give them that choice.
Intrigued?

 

—Peter Giannetti