Page 13 - LESSON 2: DISCOUNTS AND COMMISSIONS

LESSON 1: ESTABLISHING RETAIL PRICES

People go into business because they have some goods to offer the public for sale, or

because they can render some services other people need. In the process these businessmen
make profits, operating a retail store successfully is not an easy thing to do. The retail store

owner performs all the basic functions of an enterprise-buying, financing, pricing, selling, and M2_L1
servicing. These functions are by no means easy and to many people who lack entrepreneurial

ability, running a retail store might prove a disaster. Hundreds and thousands of businesses

close shop every year because their owners are not making profits.

A businessman has to worry about his sales. If he does not have enough sales, then he

is in big trouble. Among other things, a successful retailer must know how to price his goods.

He must set prices high enough to cover different costs. First, he must consider his

operating costs. These include expenses like (wages, rentals, insurance, depreciation, light and
water, and utilities. These costs are also called overhead costs.

Second, he must consider his selling costs, these include expenses like freight charges,

transportation expenses, tips, display, fail, and others.

And finally, he must consider the profit he must derive to reward his efforts and risks

and to keep his business going.

If a retailer sets too high prices, he might lose customers to competitors. If his prices

are too low, he may only "break-even" or even lose money. Thus, pricing and selling products
are important factors to consider in managing a retail store or any other business for that matter.

A. MARKON

The difference between the selling price of an article and the cost of the article is called
mark-on. For example, if Mrs. Marquez decides to sell at ₱90, the T-shirts she bought for ₱75,

₱75 is the cost, ₱90 is the selling price, and ₱15 is the mark-on (i.e. ₱90 − ₱75 = ₱15).

Thus, we can say,
− = −

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LESSON 1: ESTABLISHING RETAIL PRICE 1 | P a g e