As a business owner, one is constantly walking a tight rope between adequately covering business expenses and customer satisfaction. No one understands better when we feel we have been unfairly charged for products or services. However, one of the easiest ways to shortchange yourself and your business is under-charging for parts. Whether that is due to a sense of responsibility to the customer, or whether one thinks they are charging fairly for parts, there is a lot of revenue that can potentially be lost through the underpricing of parts.
Parts pricing is more than a simple shipping and handling charge. Every process that occurs between the need for that part being identified to the final installation of the part at the customer’s location has a cost associated with it. According to the experts at ApplianceBlueBook.com, the average cost to handle parts is about 30-35% over wholesale cost and shipping. This includes everything from researching, receiving, verifying, inventorying, technician handoff and delivery to the customer’s home. By simply charging a flat percentage, or even using the manufacturer’s suggested retail pricing, you may be losing thousands of dollars of revenue to sunk costs.
Strategies for Parts Pricing
Have a robust supplier network: Utilizing multiple suppliers and distributors can ensure access to a variety of parts at competitive prices. This network can help mitigate risks associated with supply chain disruptions.
Efficient inventory management: Having an efficient inventory system reduces costs associated with storing parts. Utilizing a just-in-time strategy, where parts are ordered as they are needed instead of maintaining an inventory can help lower carry cost and reduce waste.
Leverage bulk purchasing options: When feasible, purchasing parts in bulk can reduce unit cost for frequently used or fast-moving parts. These savings can help bolster margins
Stay informed on market trends: Regularly monitoring industry trends and local market conditions can increase awareness of the changes needed to adjust pricing strategies on-the-fly. A good barometer check can be a survey from the parts distributor a few times a year of the 1000 fastest moving parts.
Invest in staff training: Having technicians that are trained in both technical and customer service aspects of the job, they can deliver transparency to the customer and work more efficiently.
Consider the service provided: Parts offered over the counter should be priced differently than parts used in repair services. The company is doing all the leg work to research, order, and hand deliver the parts to the customer. Service parts should not be sold for the same price as a customer buying the part from the internet or direct off the shelf. Service parts are a premium service and should be priced as such.
Where profit fits in the markup: The difference between wholesale and MSRP can average between 22-24%. If the total average of handling parts is between 30-35%, and a company is selling at suggested retail price, they are potentially losing up to 13% on most parts, with specialty parts costing even more. When the company decides what profit margin fits for their business strategy, this should be added to the part price after adding the handling cost to the suggested retail price.
Software integrations: Using software can help ease the administrative burden during the researching and ordering parts. Tools like MyPartsHelp Search and MyPartsHelp Diagnostics can assist in locating and determining parts that may be needed and integrate directly with
ServiceDesk. More information on these products can be found at https://ApplianceBlueBook.com
Conclusion
Pricing repair parts is a multifaceted challenge that requires a strategic approach. By understanding what goes into part costs and implementing effective sourcing and pricing strategies, you can improve profitability and deliver exceptional value to customers. Being able to navigate market tendencies with insight and agility will set your company apart in a competitive market.
