Saturday, June 21, 2008

Paying the freight.

And oh by the way, not including energy prices in the inflation index is ludicrous not just because of the price of energy itself. My shipping costs have gone up, and that money has to come from somewhere.

It's yet another argument against heavy discounting. You want a retail profit margin whenever possible because of all the things that can go wrong. Damage, theft, unexpected expenses. Once you start discounting, it's almost impossible to raise prices on your regulars.

Bite the bullet, and stick to regular retail, and let those people who aren't willing to pay 'the freight' go.

I'm mostly going to have to take the hit. Most of my product has a SRP included, and/or a traditional price. When the price of the actual product rises, I still get the same per cent of discount. So, rising prices on the product I carry doesn't really hurt, and sometimes can even help.

But I'm beginning to see that static prices on my product do NOT cover unexpected costs in operations.

I've never run into this before. I was a student in the 70's; not a store owner.

Interesting times.


Duncan McGeary said...

O.K. I think I see a flaw in my thesis -- the rising freight cost ARE probably included in the inflation index.

Before RDC points it out....

tim said...

If you look at the long-term historical chart of both core and headline inflation, you'll see that they move together but that core is smoother and easier to spot trends.

That's why people use core. There's some hope of actually understanding what's going on.

Headline inflation is all over the place. Fun for making shocking claims, but not much utility for business or economic planning.