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“ THE LAST FRONTIER ”

RETAIL PRICING. “ THE LAST FRONTIER ”. W. FRANK DELL II,CMC DELLMART & Company. AGENDA. INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS. OBJECTIVES. Review current retail pricing process Explore consumer perception & issues Develop proposed retail pricing Process

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“ THE LAST FRONTIER ”

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  1. RETAIL PRICING “THE LAST FRONTIER” W. FRANK DELL II,CMC DELLMART & Company

  2. AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS DELLMART & Company

  3. OBJECTIVES • Review current retail pricing process • Explore consumer perception & issues • Develop proposed retail pricing • Process • Approach DELLMART & Company

  4. STAPLE SEASONAL/FASHION STAPLE / BASIC ITEM FOCUS Normal Normal Normal Mark Down Promotion Close Out Promotion • $425.1 Billion Retail Food Industry • Over-stored • Mature • Consolidating DELLMART & Company

  5. MANY NEW COMPETITORS Membership Club Drug/Chemist Convenience Fast Food Home Shopping Supercenter DELLMART & Company

  6. EDLP Advantages Low cost maintenance First market entry advantage Disadvantages Boring Requires discipline HI-LO Advantages Merchandising excitement Provides flexibility Disadvantages High cost maintenance Difficult execution MASTER PRICING STRATEGIES Fact - No retailer truly practices EDLP DELLMART & Company

  7. STORE SELECTION FACTORS Source: Progressive Grocer DELLMART & Company

  8. STORE SELECTION FACTORS Source: Progressive Grocer DELLMART & Company

  9. RETAILER GOALS High • Gross Margin • Quality Ratio Low • Price Image DELLMART & Company

  10. CONSUMERS • Recall up to 200 item prices • Frequently purchased items • High consumables • Translates to 500 - 1,000 items creating the price image DELLMART & Company

  11. PRICE COMPONENTS DELLMART & Company

  12. AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS DELLMART & Company

  13. TYPICAL PRICING PROCESS DELLMART & Company

  14. COLLECT COMPETITIVE DATA DELLMART & Company

  15. DETERMINE PRICE DELLMART & Company

  16. IMPLEMENT PRICE Minimum cost is $1.00 per item per store DELLMART & Company

  17. PRICE CHECK POS Shelf DELLMART & Company

  18. RESULT DELLMART & Company

  19. AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS DELLMART & Company

  20. RETAIL STRATEGY DELLMART & Company

  21. ESTABLISH DEPT. STRATEGY DELLMART & Company

  22. UNDERSTAND COMPETITORS DELLMART & Company

  23. Traffic Builder Transaction Builder Profit Contributor Cash Generator Excitement Creator Image Creator Turf Defender Destination Routine Occasional/Seasonal Convenience DEFINE CATEGORY ROLE DELLMART & Company

  24. DEFINE IMAGE PRICE DELLMART & Company

  25. 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 PRICE FOR PROFIT DELLMART & Company

  26. VELOCITY PHILOSOPHY • Faster sellers priced lower than slower sellers • Reinforces low price image • Basis for power curve DELLMART & Company

  27. SIZE PHILOPSOHY • Larger sizes priced lower than smaller sizes • Promotes selling larger sizes • Increase volume • Lower transaction cost • Supported by vendor pricing • Lower package cost • Lower transaction cost DELLMART & Company

  28. 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 DELLMART & Company

  29. MAGIC 9’s PHILOSOPHY • Food is a pennies business • Price with a last digit of 9 • Consumer perceive lower cost 9 DELLMART & Company

  30. AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS DELLMART & Company

  31. PROPOSED PRICING PROCESS DELLMART & Company

  32. COLLECT COMPETITIVE DATA DELLMART & Company

  33. TRIGGER PRICING DELLMART & Company

  34. PRICING CANDIDATES DELLMART & Company

  35. DETERMINE PRICE DELLMART & Company

  36. PRICE TABLE Department Category Category Sub Category Sub Category Sub Category Sub Category Image Item DELLMART & Company

  37. PRICE CONTROLS DELLMART & Company

  38. INTERATIVE PROCESS 1. Competition 2. GM Limit 3. Profit Objective DELLMART & Company

  39. IMPLEMENT PRICE DELLMART & Company

  40. PRICING FILTERS DELLMART & Company

  41. PRICE VERIFICATION POS Shelf Pricing System DELLMART & Company

  42. KEY TO SUCCESS • Understand competition • Price for profit • Consider all factors • Competition • Movement • Cost • Justify implementation • Test item sensitivity DELLMART & Company

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