Approaching Frame Markups With Flexibility
Are you realizing your dispensary’s full profit potential on eyewear and sunwear products?
Frame pricing involves adding a determined amount onto the wholesale cost of the product to obtain the best retail price. But how do you pinpoint the best amount to mark up your products?
Since today’s customer is savvy enough to price compare right on their smartphone, if you price your products too high you might price yourself out of a sale. At the same time, if you price your products too low you may lose out on profits.
While there are several ways to approach the highly important task of product markups in the dispensary, many eyecare professionals turn to an in-house, customized approach to pricing products properly for their market and customer. Here, we share the benefits and downsides of this product markup strategy.
A Case For Flexibility
While some ECPs simply follow the Manufacturer’s Suggested Retail Price (MSRP) to price their eyewear, others prefer to take a more customized approach to product pricing. They do product and market research first to determine the appropriate pricing for what their own market will bear. This pricing method also takes into consideration market influences like managed care and insurance discounts.
One rule of thumb with this pricing method is to mark up lower-priced products at a higher rate (as much as 4x cost) while marking up high-end products at a lower rate (starting at 2x cost). In addition, some eyecare businesses mark products up more (as much as three-and-a-half or four times cost) so that they can discount them with sales and promotions. This approach provides a discount for bargain-savvy shoppers while also maintaining gross margin.
Customized pricing benefits businesses that wish to deliver highly competitive pricing in their market. If you take a personalized approach to markups, however, be aware: The eyewear market has gotten a fair bit of press in the past few years regarding its huge product markups, so it’s even more important to be priced fairly today.
3 Basic Retail Formulas
Formula #1: Cost of Goods + Markup = Retail Price
Formula #2: Margin % = (Retail Price – Cost) ÷ Retail Price
Formula #3: Gross Margin = Total Sales – Cost of Goods
Markup + Markdown Calculator
Tip: Use this simple Markup + Markdown Calculator for quick help in pricing your frame products: http://retail.about.com/library/bl_markup_calc.htm
How does your eyecare business approach marking up frame products? Join the conversation on this important topic by visiting the ClubZero Facebook page here.
Check out Part 1 on this topic — ‘Approaching Frame Markups With MSRPs’ — here.