High Prices: Small Town Weakness #4… & Possible Solutions

High pricing is the fourth of seven common small town weaknesses identified by Becky McCray of Small Biz Survival. As promised in this post, following is a summary of Becky’s post on this area, as well as a few of my own observations as it pertains to Lewistown and the surrounding Central Montana area.

Weakness #4: High Prices

It’s commonly believed that “everything costs more in small town stores,” suggests Becky. However, as referenced in studies such as these, that may not always be the case. In the case where a small town shop simply cannot offer a lower price than a big box store, there are a few things that can help keep prices within a reasonable range so as not to deter locals from shopping in town.

Becky suggests retailers educate themselves on how they stack up to others and use that information when making pricing decisions.  Specifically, small town retailers can…

1) Use retail markup benchmarks. This information is available from organizations such as the Retail Owners Institute, which offers industry averages for more than 50 retail lines. Resources to help retailers find this information are available in Becky’s post.

2) A little higher may be okay, but not TOO high. Excellent customer service and a personalized, local touch can help justify slightly higher pricing, but Becky warns not to go too far in using these features to justify markups that are higher than necessary. The fact that most out-of-town or online purchases include the added expense of either shipping or gasoline offers a little cushioning in the pricing consideration, but only if the locally available product is what the customer is really looking for.

Prices in Central Montana

Pricing is one area where I feel under-qualified to offer much in the way of suggestions or even observations. As far as Central Montana pricing goes, I hear a lot of complaints about the cost of groceries. Most attribute this to the lack of a local competitor for our solo grocery store. As someone who grocery shops exclusively in Lewistown, I don’t have any first-hand experience to compare pricing to outside sources. I do think it’s important to factor in the cost of gasoline, meals eaten out and other expenses (including the value of your TIME) that result from shopping out of town when making comparisons to shopping with the local grocer.

As far as other locally available items, it makes sense to me that if a local shop can’t offer the product at a price comparable to other outside sources, perhaps they shouldn’t be offering that product at all. Rather than investing in over-priced inventory and then struggling to get locals to buy it, why not focus on finding more salable products? It is often suggested that the key to being a successful retailer in a small town is offering products that are not available elsewhere, such as items unique to the region or handcrafted by local artisans or manufacturers.

Do you have additional suggestions for how to improve product pricing in a small town? Would lower prices increase the likelihood that you’d support local shops?

 

Prior Posts in this Series…

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