Uncovering Hidden Fees

When pricing your products, there are many things you want to take into consideration – the cost of goods sold, maximum profit and loss forecasts, your markup percentage, just to name a few. But some costs are hidden, and are often overlooked by vendors. Failing to identify hidden costs when setting your prices can lead to underpricing your products and receiving low profitability.
There are many fees that a retailer may ask the vendor to cover. These include:

• Warehouse fees – the cost of distribution to the warehouse
• Line fees – a fee to have the product listed
• Shelf space fees – a fee for permanent shelf space in all stores
• Payment fees – a discount for timely payment
• Promotional fees – a fee to offset price-markdowns and advertising

These fees are not set in stone by any means. Some retailers will ask for them, some won’t. And any fees can usually be negotiated. Aside from these financial contributions retailers may ask you to make, there are other costs that should be taken into consideration:

• Delivery costs – the cost of freight and insurance on products until they are loaded and signed for by the retailer
• Penalties – a charge for late or incorrect product shipment
• Returns – depending on the retailer’s return policy, the vendor may be liable for any damaged or return products
• Bar codes – each product must have a UPC bar code, which will assist the retailer in the warehouse and in the checkout aisle
• In-store merchandising – the cost of frequently counting inventory and placing re-orders when inventory is low

Having these numbers on hand will help you set a profitable price for your products, as well as prepare you for your sales presentation.
For more information on pricing your products and understanding the retail industry, visit www.retailbound.com or email us at [email protected].