Cons/Pros Of Inflating Selling Price Of Products (Facemask/sanitizer)

Setting the right selling price of products is one of the cornerstone of community pharmacy business. A low price will encourage a large steady stream of sales with low profit. On the other hand, low sales is witnessed when the price is outrageously high leading to loss of customers.

Setting the right selling price is an art that is perfected over the years. But there comes a time when adjusting the current price of a product (s) is necessary. It happens when the wholesale price changes. However, there is a critical case we want to look into today. It is a topic that is hardly talked about in the open. Maybe because of its moral stand.

How It All Started

Covid-19

Covid-19 is a virus infection that was discovered in China in December 2019. It is highly infectious and deadly. It has claimed many lives from different countries within a short while. There currently is no cure. The best thing to do is prevention. One of the best preventive measures is simple hygiene. This has led to an increase in demand for hygiene products such as face masks and hand sanitizers.

Read Also: How to calculate the selling price of drugs

The increased demand for the above has led to shortage. To make matters worse, the major manufacturing companies are in China. And because of the outbreak of the covid-19 in China, major industries have been shut down. With little or no supply, the products are getting out of stock. China was out of stock. They started to import from other countries what they used to produce. Countries they use ro supply are now out is stock. With no supply again to Nigerian and other countries, demand outweigh supply. The problem now was an increase in price. A little increase in price can effectively be handled. It just requires selling at the old price and going to the market to buy at the new price before setting the new selling price. However, when the price surge is very sharp, an important decision falls in the hands of the pharmacist. It is either to increase the price of the ones in stock even though it was bought at a very cheap rate or keep selling at the old price before going back to the market to buy the expensive products. Is it right to increase the price of the old stock?

From the stand of morality, it seems wrong in all dimensions. From the stand of the profession, it seems wrong. From the stand of the government, it is wrong. But community pharmacies are there to save life and also for business. Now, let us look at it from a business perspective.

Community pharmacies buy different products to sell. The quantity of each product they buy depends on the rate of sale of that product. If a community pharmacy has a schedule to go to the market once a month, the quantity of each product they buy at each market is dependent on how many of that product they can sell that month. If they sell 10 particular products within a month, they can decide to buy 12 to carter for any excess demand for that month. And if there is another product that sells just one product in a month, they will buy just one.

The reason for the small buying is to prevent tying money down when there may be need for other products that the money is not enough to buy. It also prevents overstocking which can lead to an increase in about to expire drugs. The major reason which this post is based on is price fluctuations that affect sales. When you stock so many products at high price, it will be difficult to sell the old stock when the wholesale price comes down and all your competitors are selling at a lower price. However, it can favour when the wholesale price goes up and you have to sell at a cheap rate.

Let us use different cases to explain the problem and how best to solve it.

Case Study

A community pharmacy bought a pack of facemask containing 20 pairs for 1000 naira. The selling price for a pair of facemask is 100 naira. Before the outbreak of the covid-19, it will take about three months to finish selling it. Barely three days after coming back from the market, the wholesale price went up to 1000 naira for a pack of facemask containing 20 pairs. All other competitors started selling at the new rate. We don't know if it is their old or new stock. Then suddenly, there was high demand for the facemask from the community pharmacy.

At this junction, the community pharmacy has to choose between selling the present stock at the old selling price or that of the new one. There are pros and cons to each decision.

Retail price

Selling At Old Price

Selling at the old price will see an increase in the number of new customers. That is the desire of every community pharmacy. To expand in horizon. These new customers can turn lifetime customers. They got to believe in your business. However, some of them will buy with all happiness thinking the community pharmacy is not yet aware of the price surge. That is why community pharmacies that decide to sell at the old price must inform their customers about the new trend and while they decided to keep up with the old price. Explaining your stand for such action can help turn some new customers to returning customers because they see the company as having a high moral standard. Saying things like we are aware of the current price surge but decide to sell at the old price because it is morally wrong and is against our ethics s is very nice. Also adding that the quality of life of the customers at an affordable rate can help put the customers at ease. Customers satisfied with the service and price will tell their friends about the place. But the products will not last much. However, there is another advantage. Those new customers that were told about the place will come to check if the product is still available. Even though they did not see to buy, they will most likely be coming since they have heard about the ethics of the place.

But there is a problem with that. If you decide to buy another set of facemask, you will not have enough cash to buy or have to borrow to buy from the market. For example, the total sales of the pack of facemask was 2000 naira. If we remove salary and other expenses, the total money will reduce. But even if the total money is plough back into the buying of the new stock of facemask, the money will not be enough. Since the new facemask wholesale price is 10000 naira, you will need another 8000 naira.

Now let us imagine another worst scenario. If after borrowing money from your other products to buy facemask, getting to the shop and discovering that the wholesale price has crashed to the old price. All your competitors have started selling at cheap price, you will have no choice but to go back to the cheap price to save face. You have lost so much from that.

Read Also: Drugs for the Management of covid-19

To avoid running into tight situations like this, please do not restock after exhausting the old stock using the old selling price. If you must restock, reduce the quantity.

Inflating Selling Price

Inflating the price of old stock will anger most of your old time customers because they will think you are greedy. Some will even prefer to buy from your competitor. This is especially so if they know it is the old stock you are having. This will reduce the sales. And this will make the product last for some more days or more on the shelf. This is enough time to study the market. For example, sales of facemask were high on the day the news broke out that covid-19 was in Nigeria. The sales have been dropping ever since then.

If after exhausting the available products on the shelf and the price is still high, there will be enough money to buy the new stock at the exhibitant price. Even if after buying the new product and the price comes crashing down to the old price, you will not lose money even if you decide to sell at the latest price. This decision is hard to make. But every community pharmacy must plan for days like this.

Share On Social Media With Family And Friends To Show You Care!