Is Keystone Pricing Still Viable?
Q: Keystone pricing equals doubling, but that hasn't worked for some time. What's the new version across the board now?
A: Your pricing is your pricing. If you have taken on a huge debt load with a home equity loan to buy the building or to get the location, and then you financed your merchandise the same way, well, I'm sorry. Your cost of goods is going to be a lot more than somebody else’s whose dad bought the land and the building, so their rent is free.
All they have to worry about is the family who's being paid probably less than the prevailing wage, and so their cost of business is substantially less, so they can charge less.
But if at the end of the day, you're here to make a profit, you cannot be like Amazon was for decades and say, "Profits don't matter," because they had Wall Street dropping buckets of money, and their Amazon Web Services now supports the retail end.
Most independent retailers I know have a real problem marking merchandise at the correct price. Because they know a widget costs $25 they feel they are taking advantage of people if they price it at $50. That "if they only knew I'd be seen as a crook" has got to go.
The reason keystone pricing was the benchmark is because without fancy computer programs, you could reasonably assume that by doubling the price you paid it would cover any promotions, discounts, or coupons you had on the product along with theft, breakage, and returns. It's still a good place to start.
I always recommend you do a product search on Amazon before you take on a new line to see how close you would be to online resellers.
At the end of the day, whatever your pricing structure is, it has to be one that supports your business.
You have to sell what you have, and at a price that makes you a profit.