Static vs. Dynamic Pricing At Your Garden Center

Static vs. Dynamic Pricing At Your Garden Center

by Steve Bailey

IMPORTANT: This is one of Steve's articles you need to read, re-read, print, and share with all your staff!

Margin remains one of the main topics I cover working onsite with garden centers in The Group. Every Center has to generate enough Margin Dollars to pay for Operating Expenses, Wage & Wage Benefits, and put a respectable amount of Profit Dollars on the bottom line.

How you price the product you sell has a major impact on Total Revenues and Margin Dollars. Price it too high, and you won’t sell enough units. Price it too low, and you usually won’t sell any more units, your Center will just realize less Margin Dollars. The key to retail pricing is to find the ‘sweet spot’ for an Item that will maximize the Margin Dollars realized through the Price/Units Sold formula.

This is where Static and Dynamic Pricing come in.  Before we go any further, keep in mind we are not talking about Variable Pricing as such. You all differentially price items within Categories (or I hope you do) via Perceived Value or Supply and Demand methods.

Rather, Static and Dynamic Pricing are keeping the price on an Item the same the entire year or years (Static) vs. raising or lowering the price on an Item based on what price will maximize Margin Dollars. I’ll bet you already know which one I prefer.

Let’s talk first about Static pricing. The main case made for not raising and/or lowering a price are the following –

“This is the price we always have charged for that Item since the beginning of the year.”
On this one, I hope you are monitoring your Landed Cost and it hasn’t increased. If it has, your Margin Dollars just shrunk by the amount of the Cost increase.

“The customer knows what the price should be, so we cannot change it or they won’t buy the Item.”
Nothing could be further from the truth. The only known price items are milk, bread, and gasoline. The chances for a customer remembering your price on a 2 Gallon Snow Azalea in the spring and when the return in the fall are nil to none. And even if they do, they are aware of price changes in retail and normally take them in stride. If they don’t, and it’s a ‘really good customer’ that complains (it wont’ be), smile and reduce the price down just for that ‘really good customer’ this one time.

“The price we are putting on that product is the price everyone else is selling it for.” 
Sure, you may have to stay close to what everyone else is, but that doesn’t mean you have to have exactly the same price. Besides, who’s to say they aren’t raising or lowering their prices during the course of a year? And do they have the same expense structure your Center has which requires the same number of Margin Dollars?

“We print a catalog so the prices can’t change until we print another one a year down the road.”
The only thing I have to say about this one is, I hope this isn’t you. The main reason Centers might still be using a printed catalog is to satisfy their wholesale customers who are not supporting the retail price in the first place, or for an information piece for their Staff. In both cases, this can be accomplished in a fraction of the time with an online catalog.

The reasons go on and on, but the main reason Owners and Staff do not want to change prices is because they know what the Landed Cost is. Their own frugality coupled with knowing the Landed Cost makes it difficult to justify a higher selling price when it is justified. Conversely, their need for Margin Percentage makes it difficult to lower a price to possibly increase units sold and thus Margin Dollars.

Dynamic pricing occurs everyday in all of retail. Think about it, do you really know the last price you paid for any product you buy in retail, with the exception of highly commoditized items such as milk, bread, or gasoline? And even if you do remember the price, do you not buy it the next time because it is higher than it used to be? Chance are you picked it up anyway.

Maximizing Margin Dollars is at the heart of dynamic pricing. Determining what the price should be during various times of the year is difficult for garden centers. Our POS systems do not have the computing power to suggest a higher or lower price based on the weather, demographic, or other external factors. Larger retailers do. That’s why they take advantage of raising and lowering selling prices to realize the highest amount of Margin Dollars. Garden centers have to rely on either a change in cost or a gut feel for the supply/demand curve on a product.

Another factor that larger retailers use to raise or lower prices is not pricing individual products. They don’t put a price tag on every item, except in rare cases. When was the last time you bought a product that actually had a selling price on it? Chances are the price is on the shelf sticker or a sign in a mass display of the product.

As a result, they can react quickly to the need to raise or lower prices through changing the shelf sticker and the POS system. Done. Now those one hundred widgets that might have sold for $4.99 originally will go out at $5.99, netting an extra $100 in Margin Dollars. No extra units sold, very little additional labor, just extra Margin.

Let’s turn to an independent garden center. Almost all of the garden centers I have visited tag every plant and hardgood with a retail tagged price. In order to take advantage of an extra nice shipment of one hundred azaleas that could sell for $5 more per plant ($500 extra Margin Dollars), someone has to take off all of those one hundred tags, print new tags, and then re-tag all one hundred plants. Does that get done in the heat of the battle of spring, when it’s easier to take advantage of pent-up demand? Rarely.

One footnote on not individually pricing every plant. You have to have a very good signage system, every item barcoded, and an internal plan and person to keep everything updated. That’s the only way it will work. Otherwise, your customers will be roaming around looking for a price, and when they can’t find that,  someone to help them find the price, which results in lost Revenues – and Margin Dollars.

As stated earlier, there’s nothing – or there shouldn’t be anything -that says your prices have to remain the same for any period of time, even within the same season. Negate the operational issues that prevent it, educate the Staff on why it’s a necessity, provide a good shopping experience, and you will be rewarded with extra Margin Dollars. And you don’t even have to sell more units, but you probably will since you and your Staff will have more time to actually sell your product.

Still have questions? Let's talk!


Got questions or need more information about the Dynamic Pricing, the WDR, upcoming Annual P&L Study or your profitability? Give Steve a call or email!

Steve Bailey
Tel: 618.319.9205
Cell: 618.521.5225


Steve Bailey is a service provider for The Garden Center Group and manages all Group financial sharing programs. The Weekly Department Review (WDR) and The Annual P&L Study are exclusives to The Garden Center Group and are included in your retainer!

REMEMBER: Your interaction (by phone and email) with Group Service Providers such as Steve Bailey, Robert Hendrickson, Sid Raisch and Jean Seawright, are included in your retainer! So what are you waiting for? Take advantage of all that The Group has to offer and give them a call or send an email now!

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