Logo
09 August 2010

The price is right

Back
Andrew Davies

If you can boil down business to one easy philosophy, it's that you need to sell stuff for more than you bought it for - stop me if I'm getting too complicated.


What actual price you buy it for, and sell it at, is the tricky bit that divides the successful from the not-so-prosperous - particularly if you're the retailer at the end of the chain that includes at least distributor, manufacturer, and raw material supplier.


There's an awful lot about the price of stuff in this month's issue of kbbreview (August 2010). The most shocking is the alleged cavalier attitude of some of the biggest names in bathrooms to the laws surrounding competition. A massive fine from the EU has highlighted some dodgy dealings in Europe, not the UK, in fixing prices between different companies across several years.


Many of the companies are protesting the severity of the punishment and the legitimacy of the investigation, but whichever way you look at it, it's hugely embarrassing and potentially financially catastrophic for those looking wobbly.


Elsewhere, we have some feedback from a feature we ran last month on discounting

 and whether it's the supplier's fault for having such widely varying prices between different routes to market - the internet in particular - or whether it's the retailer for not sticking to their guns and having the confidence to sell at full price.


As the easy access to information becomes so inherent in business, the debate over pricing is going to run and run, but what's interesting is that the very practice that the European bathroom industry has been knuckle-rapped for is the one the retailers themselves advocate for dealing with internet pricing - fix prices and restrict competition.


Retailers with showrooms, which is a real investment, argue that suppliers either shouldn't supply internet dealers or tell them what they should be selling it for - both of which are, as the EU has proven, legally ropy.


This is why so many suppliers are now trying to get retailers to at least publish the RRP, so consumers can see the discount they're getting rather than just letting valuable brands be eroded by retailers desperate to close a sale.


Likewise, retailers are crying out for transparency so they can at least benchmark themselves with accurate information rather than trying to second-guess their competitors selling the same product from the same source - online or not.


What all involved in the independent sector are saying is that the consumer has been educated and programmed to immediately assume that a bargain, deal or discount is an instant right when buying a kitchen, bedroom or bathroom - and we have the major multiples to thank for that. Even the smaller chain is forced to go down that route to some extent. In a recent interview we did with Noel Dean of Betta Living, he says that one of the secrets of a good showroom is that "the signage...has to make it look like you can get a deal. Our point of sale is akin to DFS."


When the market shrinks, everyone starts counting the pennies and monitoring every margin and that's where the the fundamental rule of business becomes so important - what price are you getting and what price are you selling it for?