Use visual merchandising on non-price sensitive items

EASTENERS are found in virI tually every home center as part of the hardware department, but few managers pay much attention to them as profit centers.

This is wrong, according to industry consultant Joe Samulin. Fasteners and hardware are usually nonprice sensitive items. "Few people shop these items," he told managers attending his store management workshop. "There's plenty of room for margin increases in this potentially lucrative area."

Story at a Glance

How to increase margins on nonprice sensitive hardware. industry consultant explains visual merchandising technique... suggests ways to get more than average 35.54"/o margin.

The best way to increase the margins on these items is by applying visual merchandising. Samulin defines this as considering factors other than the normal percentage of cost pricing. Larger size, longer length, more items in a package, better appearance. more expensive looking are the clues to look for when applying visual merchandising. Each can be justification for a higher margin. Think like a consumer, not a retailer, and price the merchandise at what you think he will pay.

A survey conducted by the Mountain States Lumber and Building Material Dealers Association on retail lumber industry operating ratio averages reported 35.54V0 as the average mark up. This can be upped substantially using the Samulin method of visual merchandising.

He relates the experience of finding both l-l/2" and 2-l/2" mollies (molly bolts) selling for 570 for four. Will the customer Dav more for the longer length? "You bet your screwdriver hewould," Samulin says, "and it's 150/o down the drain (unless they're priced higher)."

He also tells of conducting an informal test in which he asked a group of people how much more they would pay for the next larger size of a screw. He found that the price most people named was 120lo higher than that of the smaller screw. Disparate sizes should not be priced the same, Samulin emphasizes.

Customers expect to pay more when it appears they're getting more. "lf they need it and the price seems reasonable they'll buy," he says. "And two weeks later they won't remember what they paid."

Visual merchandising doesn't depend simply on size relationship. Quality perception comparisons are also valid, according to Samulin. If the item looks better to him, the customer will willingly pay more for it. For example, most customers equate brass as being better than galvanized.

Pricing merchandise item by item instead of by percentage of cost can also raise the margin, Samulin points out. Instead of applying the standard percentage of cost mark up, he suggests rounding figures up. For example, 87 cents becomes 89 cents, 97 cents. 99 cents.

Samulin lists two absolute musts for applying visual merchandising to non-price sensitive items. (1) All price increases must be taken on the floor. (2) Once a year each buyer working with the merchandise manager must go through the department and re-evaluate each item.

Use the loss leaders to get the customers into the store, he advises, but go your own way on the rest ofyour pricing. Get to those margins and use them to your advantage.