PrintThere is a balance to consider when establishing your business's profit margin. If your margin is too high, you will sacrifice sales; if it is too low, you will not remain in business in the long term.
With all of the shopping sites on the Internet, comparison pricing is easier than ever. Net consumers expect a discount or at least an attractive price. Many companies are making online sales at cost — or even at a loss — just to gain market share. This can make it tough for businesses to turn a profit.
Even so, there are several ways to stretch margins and earn a greater profit without raising prices.
- Cut a better deal with your suppliers, or find a more competitive supplier.
- Negotiate volume price breaks. If lower prices can increase sales enough, you might meet volume discount requirements and actually net more profit.
- If you currently buy from a distributor or manufacturer, think about going direct or manufacturing yourself to cut out a layer of markup.
- Develop a private-label brand that's more affordable and immune to price comparison.
In general, ask yourself why you're facing margin pressures. It may be that your prices are right, but your operations are too expensive. Look at every aspect of your business to figure out how to get your cost of sales where they need to be.
Before you make any hasty decisions, carefully compare your prices to your competitors'. Is there a product category you can dominate by having the best selection, a dependable in-stock position, or expert sales information? If so, you may be able to raise prices in this line and not lose business.
