Slide1: W. FRANK DELL II, CMC DELLMART & COMPANY THE GOLD MINE IN RETAIL PRICING


AGENDA: AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT


Objectives: Objectives Identify pricing improvement opportunities Describe approach to achieve results Present new research


Scope: Scope Retail Food Excluding perishable commodities Mass Merchant - Basics Excludes fashion & seasonal


Observation: Observation Much of retail pricing seems to be follow the leader Not unlike a dog chasing its tail


Theme: Theme Price for the consumer Consider competition Price for Net Profit Not Gross Margin


AGENDA: AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT


#1 Slow Seller: #1 Slow Seller Why is an item a slow seller? Small consumer market Inadequate retail space Priced wrong


25,000 SKU’s In Typical Store: 25,000 SKU’s In Typical Store 1,000 sell more than 1 case/week 4,000 sell between .5 and 1 case/week 20,000 sell less than .5 case/week Slow Seller


SKU Universe: SKU Universe Estimate 4 to 5 million Average store stocks .0056% Many unique items and opportunities Slow Seller


Approach: Slow Seller Approach


Case Study - Grey Poupon: Case Study - Grey Poupon Selling 4 units/week Prices $1.79 Increased price to $2.79 Sold 4 units/week Increased sales $4.00 per store Increased profit $4.00 per store Slow Seller


#2 Private Label: #2 Private Label If product quality is equal to National Brand Why is the price 25% plus lower?


Low Retail Not The Answer: Low Retail Not The Answer Private Label


Approach: Approach Private Label Note: Quality must be equal or superior


Value Concept: Value Concept Private Label PRICE QUALITY VALUE =


AGENDA: AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT


Why Promote?: Why Promote? Create merchandising excitement Attract customers Present savings Show value Reward loyal customers


Promotions Are Difficult: Promotions Are Difficult


Promotion Factors: Promotion Factors


Breakeven on 11% Deal: Breakeven on 11% Deal


Low Private Label Share: Low Private Label Share


Moderate Private Label Share: Moderate Private Label Share


Promotional Index: Promotional Index


Promotion Conclusion: Promotion Conclusion Low Private Label share Moderate Private Label share Private Label Private Label Natl. Brand Natl. Brand


AGENDA: AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT


Activity Based Costing: Activity Based Costing ABC is a cost allocation or assignment methodology Cost assigned based on the activities and drivers Activities are tasks within a process Drivers are factors creating costs


GM Vs ABC: GM Vs ABC Gross Margin Relationship between cost and selling price Not a predictor of profit Percentage ineffective during deflation times Profit Contribution Sales - Cost of Goods Sold = Gross Margin + Direct Revenue - Inbound Costs - Outbound Costs = Profit Contribution


Primary Processes: Primary Processes


Costs Follow Product Flow: Costs Follow Product Flow


Greatest Cost Is DSF: Greatest Cost Is DSF


Proposed Pricing Process: Proposed Pricing Process


Collect Competitive Data: Collect Competitive Data


Trigger Pricing: Trigger Pricing


Pricing Candidates: Pricing Candidates


Determine Price: Determine Price


Price Table: Price Table Department Category Category Sub Category Sub Category Sub Category Sub Category Image Item


VELOCITY PHILOSOPHY: VELOCITY PHILOSOPHY Faster sellers priced lower than slower sellers Reinforces low price image Basis for power curve


SIZE PHILOSOPHY: SIZE PHILOSOPHY Larger sizes priced lower than smaller sizes Promotes selling larger sizes Increase volume Lower transaction cost Supported by vendor pricing Lower bracket cost Lower transaction cost


FLAVOR/PATTERN PHILOSOPHY: FLAVOR/PATTERN PHILOSOPHY Create sub-group Price all items the same Even if cost differs Consumers perceive all items as equal Cherry Raspberry Orange Grape


Price Controls: Price Controls


Iterative Process: Iterative Process


Implement Price: Implement Price


Pricing Filters: Pricing Filters


Unlock The Gold: Unlock The Gold Understand your competition Price for net profit Consider all factors Competition Movement Cost Justify implementation Test item sensitivity


Slide47: W. Frank Dell II, CMC President DELLMART & Company 125 Hardesty Road Stamford, CT 06903 USA Tel: 203-968-8609 Fax: 203-968-8613 e-mail Wfdell2@msn.com