When the shop down the street sells it cheaper

Ask what exactly is cheaper before you answer. Most of the time the size, the brand, the freshness or the payment terms are different, and the two rates were never the same rate. When it really is the same thing, decide once for everybody rather than dropping the price for whoever complained loudest.

The sentence every shopkeeper hears

"The shop at the corner is giving it for a hundred and fifteen."

It arrives casually, usually while you are handing over the goods, and it does two things at once. It asks you to reduce the price, and it tells you that somebody else in your street is now the reason a customer is standing there hesitating.

Most shopkeepers react in one of two ways, and both are bad. Some drop the rate immediately to avoid losing the sale, which costs money and teaches that customer to say the sentence again next week. Others take offence and say something about the other shop, which sounds defensive and is remembered.

The right response is neither, and it starts by noticing that you have been given no information. A number has been quoted at you. You do not know what it applies to, whether it is true, or whether the customer saw it himself.

So the first move is not a decision about your price. It is a question.

Find out what is being compared

There are more reasons for two rates to differ than shopkeepers usually consider, and almost all of them are ordinary rather than dishonest.

Check these before you believe the comparison

• Is it the same size, weight or pack?
• Is it the same brand, or a cheaper one that looks alike?
• Is it fresh stock, or old stock being cleared?
• Is that rate for cash only, with credit priced higher?
• Is it one item at a loss to pull people in?
• Did the customer see it, or did he hear it from somebody?

Pack size is the commonest by far. A smaller bottle, a lighter bag, a pack of nine instead of twelve. The customer is comparing the number on the shelf edge, not the rate per kilo, and once you say the sizes out loud the whole conversation resolves itself.

Brand is next. Two packets that look almost identical from a distance can be very different things, and a customer in a hurry genuinely does not notice. There is nothing wrong with the cheaper one; it is simply not the same purchase.

Payment terms matter more than anybody admits. A shop selling at that rate for cash only, while charging more or refusing credit altogether, is not undercutting you at all if you are carrying that customer's balance for three weeks. That is a real service and it has a real cost, which is the whole logic behind pricing what you sell properly.

And some of it is a deliberate low price on one visible item, sold at little or no profit, to pull people through a door. It works, it is a normal way to run a shop, and it tells you nothing about the rest of that shop's rates.

Ask the questions in a friendly voice and you will usually find one of these is the answer. If none of them is, you have learned something genuinely useful.

What matching the rate really costs

Suppose it is the same item at a lower price. Before matching it, do the arithmetic once, because the size of the cut is not the size of the loss.

Say you drop the rate by Rs 5 to match

Your rate on the itemRs 120

What it cost youRs 104

Your earning per piece before the cutRs 16

Your earning per piece after the cutRs 11

Extra pieces you must now sell to stand stillAbout 45 more in every 100

That last row is the one that stops people. A five rupee cut on a hundred and twenty rupee item looks like four per cent off the price, and it is nearly a third off what you earn. To end up where you started, you have to sell almost half again as many.

Sometimes you genuinely will sell that many more, and then the cut was correct. Far more often you will sell the same quantity for less money, and the shop is quietly poorer for it without anybody noticing what happened.

There is a second cost that never appears in any calculation. A rate you drop under pressure is very hard to raise again, because putting it back up feels to the customer like a punishment rather than a correction. You have not given a discount; you have changed your price permanently for that item.

So treat a cut as a decision about your whole shop rather than as a way to finish a conversation. If the rate should be lower, lower it for everybody, put it on the shelf, and let it be your rate. If it should not, keep it and say so.

What you sell that a rate cannot beat

The reason this problem feels frightening is that shopkeepers think about price and forget everything else they actually provide.

Credit is the largest of them by a distance. A customer who takes goods from you and pays at the end of the month is not comparing rates with a cash-only shop; he is comparing having the goods with not having them. That service is worth far more than five rupees and both of you know it.

Knowing the customer is the second. You know what he buys, you keep it for him, you tell him when the good stock arrives, and you take it back when his wife did not like it. None of that exists in a shop where he is a stranger, and it is exactly the ground on which regular customers are kept.

Availability is third and it is underrated. Being open when he needs it, having the thing he came for, and having it fresh, are worth a premium every day. A cheaper shop that is out of stock has sold him nothing.

And there is trust in the weight and the count. A customer who has never once found your bag light does not do arithmetic at your counter. That reputation takes years to build and it is the single strongest thing a small shop owns.

None of this is worth saying out loud in a defensive speech, and saying it will make you sound worried. It is worth knowing, because a shopkeeper who knows what he is selling does not panic about one line quoted at him.

What to say at the counter

Keep it short, friendly and unbothered. The tone carries more than the content.

Answering the cheaper-shop line

✓Say this

• "Which pack size is he selling? Mine is the larger one."
• "If it is the same thing at that rate, take it from him."
• "My rate is 120 and it is the same for everybody."
• "Take a case and I will do a case rate for you."

✕Not this

• "He is cheating you, that is not real stock."
• Dropping the rate for the one customer who complained
• Explaining your costs to justify the price
• Saying nothing and quietly feeling beaten

The second line on the left is the one that surprises people, and it is the strongest thing in this article. "If it is the same thing at that rate, take it from him" ends the negotiation instantly, keeps your dignity, and almost always results in the customer buying it from you anyway.

It works because it is true and because it is calm. You are not competing for that sale on price and you have said so without saying anything about anybody else, which is precisely how the customers who ask for a discount conversation should end as well.

Never say anything about the other shop, its stock or its owner. It sounds like fear, it travels back down the street within a day, and it makes a customer defend the man he was about to walk away from.

And do not explain your costs. A rate that needs justifying sounds negotiable, and the customer did not ask for an explanation, he asked for a lower price. "My rate is 120 and it is the same for everybody" is a complete answer.

When you should cut, and how to do it once

Sometimes the honest answer is that your rate is too high, and it is worth being able to hear that.

If several customers mention the same item, that is information rather than pressure. One person quoting a number is a conversation; four people quoting it is a market rate you are outside of, and it is worth checking yourself rather than arguing.

Check your own buying first before touching the selling price. Very often a competitor is not selling cheaper, he is buying better, and the answer is a different supplier or a larger order rather than a thinner margin.

If you do cut, cut once, cut publicly, and cut for everybody. A rate written where people can see it, applied to every customer, is a price. The same reduction whispered to whoever complains is a mess that costs you money and creates the impression that your prices are made up on the spot.

And consider whether a second rate serves you better than a lower one. Selling by the case or the dozen at a different price is an honest way to compete for the bigger buyer without lowering what everybody else pays, which is the ordinary logic of keeping a retail and a wholesale rate.

Common questions

A regular customer of ten years is asking me to match a rate. Do I make an exception?

Give him something rather than a lower unit price, because an exception on the rate never stays an exception. A case rate, a small addition to the order, or first call on stock that is scarce all recognise what he is worth to you without changing your price list. Ten years of custom deserves an answer, but the answer should be something you can repeat with a straight face when the next customer asks.

The other shop is genuinely selling below its own cost. What can I do?

Wait, and do not follow. Selling below cost is something a shop can do on a few items for a short period and never across the whole shelf, so match nothing and let it run its course. Use the time to make sure your regulars have no other reason to leave, because the customers you lose to a temporary rate come back and the ones you lose to poor service do not.

Should I check my competitors' rates myself?

Yes, quietly and occasionally, on the items that actually matter to you. Knowing the real numbers on your twenty best-selling lines is genuinely useful and stops you reacting to sentences quoted at the counter. What is not useful is checking constantly or pricing everything against somebody else, because that hands your shop's decisions to a person whose costs you do not know.

My customer says the rate he was quoted included delivery. Does that change things?

It changes it completely, because you are then comparing two different services rather than two rates. Work out what taking the goods to his house would cost you in time, and either offer it as a separate priced service or say plainly that your rate is for collection at the shop. Either answer is honest; what causes trouble is absorbing a delivery cost silently and wondering later where the margin went.

How do I stop customers using this line every week?

Answer the same way every time, in the same friendly tone, and never reward it with a discount. People repeat what works, so a shopkeeper who has never once dropped a rate under that pressure stops hearing the sentence within a couple of months. Being consistent is more effective than being firm, because it is the inconsistency that keeps people trying.

Is it worth telling customers why I cost slightly more?

Once, briefly, and only if you can say it in a sentence without sounding defensive. Something like keeping the larger pack, or holding fresh stock, or carrying balances until month end is a fact rather than an excuse. What you must avoid is a speech about your costs, because the moment a rate needs a paragraph to defend it, the customer starts believing it is too high.