Dogosh

There was a case in an effort to garment retail. The problem that often was dealt at this time was how appointed retail price that was exact, so as to stay competitive ( this was the new player) but continued to give the profit that was enough to operational and definitely, the investor. Any parameter that must in considered, and how applied this parameter in the determination retail price? And to reply this matter returned to the basic matter, that is,
Price : the first thing must be ascertained was analysed whether you have entered the target of market that was true for the product that you sold , and whether the location of the sale has been strategic enough for the target of market/ customer that was wanted by you. Afterwards saw in market their position , the old player or our biggest competitor was playing in the position of the price below or relative was the same as us. With the note, we were in the position of the thing kind, quality, and the service method towards customer (customer service) that was relative same with this competitor. Basically we must see or analysed the 'competitive advantage product' or our efforts and analysed the biggest competitor.
When we the newcomer, and was not certain with our product and our service in more higher of quality than the senior player (notabene: our competitor), its better to playing in safe position, for example with reducing the margin profit or placed retail price under the price our the old player. Minimal for the acceleration of the return or the rotation of capital. The pricing retail under the old player in fact was carried out also for the product that relative had a quality higher. This could be done in order to pursues the sale target and created brand awareness in our market towards presence.
Except when we convince with the competitive advantage product and service to play in Premium market and created the special image brand, then we could determine the price to seeing the level of preference of the product election in the difference premium class . For this, our task of being concentrating thought about the marketing Strategy for the Premium market. (and most important... your courage to enter this class... ).
marketing plan to estimate the stage or the year could be achieved to how many actual profits. For the explanation what break even analysis, apart from in business book or marketing, in the internet also enough and was easy to looked for but also was digested concerning what and how break even analysis that was tried by us depicted a little to breakeven analysis efforts this garment retail :
the formula for Break even: Fixed Cost was divided by Contribution Margin per the unit, Contribution Margin per the unit : Sales per the unit of – Variable Cost per the unit.
Fixed Cost : the cost that must be spent by you good when you have a yield or were not productive in range specific time, for example a year. (for example: building rent, the insurance, etc.)
Variable Cost: fees that were very influential in the number that you the production for example material cost or the worker, the cost shipping and other.
The example : to build the company, total your fixed cost in a year of valuable 50,000,000,-. Afterwards your variable cost (good that was productive or bought garment from supplier to be sold again) was: material cost 100.000 per unit, the worker 50.000 per unit, the other cost in variable cost 10,000 per the unit. So the total your variable cost 160,000.
If your competitor sold the thing that was the same as the position. 300,000, and you wanted 'Price War' by means of under the price of the competitor, for example 260,000, then your Contribution Margin per unit was 260,000 – 160,000 = 100,000.
So the number of units that you must be pursued to be able to reach the profit in this year : (50.000.000 / 100,000) x 1 unit = 500 unit When you achieved the sales on 500 units in this year, the sales surplus for your profit and your investor.
That became the problem, could we pursue the sales on target 500 units to reach break even point in a year. This depended how our marketing strategy in a re-manner saw : the target market , the location of distribution / the sales, competitive advantage product, competitor analysis. However when the possibility of the condition situation for the economy and the environment the business did not enable, better you used fixed cost during 3 years or 5 years, despite finally patient several years to enjoy the profit when break even point just was exceded.
But how, if at this time we have tried to carry out the election merchandise that was exact, to reduces the margin profit, and tried playing in the low price of competitor and when certain applied discount as far as 50% for all items. However the fact is always did not go smooth, this raised our question how, and as big thought to mark-up this factor "x" in determination retail price to covered the risk that must be faced. In a sense how we counted the risk personally in the determination retail price?
if the question was how Mark-UP this “X” factor (I assume only the X factor as cost), so far the available fact did not yet find standard product “A” must mark up so many, product “B” must mark-up so many. Except indeed this Company appointed the SALES TARGET that must be reached their Sales Force with standardized percentage mark up so many and so many, that possibly with the foundation of certain thinking from this company with standardized percentage was like this. Or had Syndication of the market in the certain industry that made you must join in the standard mark up or the selling price limit that was permitted.
For the problem this garment retail , for example, with the price list we could from supplier plus the cost shipping and other became total cost so many, then the selling price must in mark up so many percent of the total cost available. But how many to be precise the percentage, I was thought that must be enough to carefully in order to not lose the customer because mark-up to covered this risk finally even had made the price be the height and customer became lazy to entering the shop.
Not only to election Merchandise that was accurate, but also the Customer wish to pay (CUSTOMER WILLINGNESS TO PAY) must be measured with did survey. Lest we the wrong move only because covering the risk in fast time. In fact in business was natural to break even point in restraining specific time, 3 years for example. At first increasingly big efforts that in undertook, for example the factory garment, by machine investment etc. that was far more bigger, then break even point took place older.
There were 3 matters here that must be thought especially in internal the garment business in a year went, about the possibility to retail price stayed competitive in the eyes of customers.

1. We already to minimize the cost continued to undertake this business, especially when startup. When being already done, for example rent of shop / the building that often was cost highest in start up business, was item that could be anticipated to minimize other high fees (FIXED COST).
2. have have controlled the inventory so well for that not overstock. The election merchandise accurately also really could help anticipated inventory to not overstock. (INVENTORY).
3. Have we made the promotion directly in the location of sale with something 'events' that different? (PROMOTION)

as normally Break Even Point in the company was 3 to 5 years. However its returned with in how could you to minimize the cost in your FIXED COST. As reduced of the cost area especially at the time of start up or in a year, will be increasingly fast the break even point was pursued. So as not many risks of the loss because of must cover this cost fixed . For example you might not lease the office building, but utilised some areas of the house to be made the office. This to press the building cost or the other cost, so as fixed cost you did not become high and break event point immediately could be reached shorter.
The second matter, apart from carrying out the election of exact of merchandise, also did survey, that is survey to measure the Customer wish to pay (Customer Willingness To Pay). This not measured the capacity, but rather in the Customer wish to buy and pay this product. You had product so good and fashionable, to close the cost / the available risk, so as you possibly installed the price on the competitor. In fact, when customer did not have the capacity to pay, that quite definitely will be the problem in finishing stock when we were wrong to carry out segmentation our customer.
Survey for Customer Willingness to pay that was important, because 'the wish was different from the capacity'. However the capacity could drive the wish, so as customer was still buying your product. But also must be paid attention to whether having the substitution thing/the other replacement who was wanted by them was in the other shop with the competitive price, so as to be able to result in several item in stock of the thing was not bought.
For survey this:

• for you to estimated the price or mark – up that in accordance with purchasing power and the wish in fact from our customer in segment that you have decided .
• for the election merchandise that was exact so as with the available of capacity of purchasing power or the will from customer to pay this product, could become the reference budget purchasing .

To control the possibility of happening risks, better be carried out anticipation in INVENTORY. As apart from inventory system that was repaired (for example the thing was lost in inventory place, the movement in and out of the thing, et cetera), also counting at the time of you analysed the profit and loss. Because of the use methode FIFO (First in First Out), LIFO (Last In First Out) or Average Cost Method in accounting will influence how many net Income in fact. You could discuss with your Accounting Department .
In analysed the inventory at this time, possibly that could be tried undertook at this time, was

1. Sales Analysis for this year, what kind of product that customer enjoyed , and at the time of when happening peak in sales. With analysed this, you could anticipate thing supplies to not overstock or the possibility not the behaviour. So as stock could completely fast and did not make inventory continue to on the hands too long. This could mean the loss, because possibly at the time of the purchase, you used the bank's credit, and interest the bank was continuing while the thing was still being kept as inventory. Although being assets, but not something that was fast liquid became money. However could happened at the time still could not analyse exactly, yes, possibly more must be open to see taste of customer against our product and trend for that. Or possibly with our expertise or the staff in determining appetite/taste in market, even could to drive customer to see us as trendsetter.
2. Had the possibility with the available condition, carried out the choice inventory with the condition Make-to-stock or Make-to-Order. Make-to-stock (usually to garment manufacturer) usually in the condition for anticipation demand at the time of certain seasons, so as they made the production for stock. (Usually was carried out for consumption in the 4 country seasons). However this only with the conviction has carried out the Sales analysis uptil now and the projection for the following requirement, so as to anticipate the market request and not until happened shortage stock. Now for Make-to-Order, this was quite influential in our service in customer, because they must be waiting until could enjoy with this product. This also really helped you to anticipate the risk so as the thing that was available only at the time of order. For example possibly the garment that was displayed only several sets, for example display so as could control purchasing the budget for the procurement of things.

With the controlling inventory (in and out), anticipated from the election merchandise, and found out the Customer wish to Pay (`Customer Willingness to Pay Survey), could help you to anticipate risks that emerged and controlled fees that might not, so as you might not be forced mark-up that was not yet measured that could be competitive or not.
My opinion when the new business a year, the possibility of developing was still being big opportunity, for increase in the sale, possibly could make event a kind fashion show in the shop as one of the promotion efforts of the product. Or like that had been seen by me where having one shop accessories, that could continue exist sold in this Mall that notabene for products that were sold that in fact simple.
Moreover could be counted was easy to be encountered by us in Jakarta. However the owner installed Fashion TV with the models that back and forth in catwalk especially featured certain products a kind that he sold in this shop. He placed the position of the Flat Screen TV was big enough that continually ON in the shop, with the position that eyecatching to be seen from the person that through and did not intend to enter the shop, to come in / entered. Yes, still had other ideas that could be developed by you to form the image or educated the candidate customer by putting forward models wore product that fashionable was seen attractive, so as that earlier did not have the intention bought, so bought.