Essay on Retail Price

710 Words Oct 10th, 2015 3 Pages
There are four main factors retailers consider when setting a retail price. The four factors are (1) the price sensitivity, (2) the cost of the merchandise and services, (3) competition and (4) legal restrictions. Some retailers also often use high/low pricing strategy. High/low pricing is a type of pricing strategy that usually small to medium size retailer firms’ use. Mostly firms will charge you at a high price and after the demand for the item has decreased, the firm will then lower the cost and sell it to customers at a discount price. The high/low pricing has some benefits. The advantages are that this strategy increases profits because high/low pricing lets retailers charge a higher price to customers who are willing to pay and …show more content…
posted prices. Predatory pricing is when dominant retailer sets his prices lower than it costs just to drive the competitive retailer out of business. Horizontal price fixing is when two retailers in competition agree to set the same price. A bait and switch tactics is when the customers gets drawn in the store by false advertising price and then once they are in the store , induces them to purchase a higher prices model. (Levy & Weitz, 2012, p.394). Retailers often risk violating any of the legal issues, engaging in the illegal activities helps retailers increase profit, and eliminate their competition. By using predatory pricing a firm can easily get rid of their competition. Price discrimination is broken down in three categories. The three categories are first degree, second degree and third degree. The difference between the first degree and the second degree is that in the first degree retailer can charge any price he/she wants depending on the customers willingness to pay, the seller might ever bargain, while “he second type of price discrimination involves the establishment of a pricing structure for a particular good based on the number of units sold. Quantity discounts are a common example. In this case the seller charges a higher per-unit price for fewer units sold and a lower per-unit price for larger quantities purchased. In this case the seller is attempting to extract some of the

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