What is your markup policy? Is keystone still the rule?

Tony Falcone, Fast Buck Freddie's Key West, FL

In Key West, where expenses are so out of hand, keystone markup [double the wholesale price] is a thing of the past. Twenty-six years ago, when we were formulating the idea of the store and had no idea how to run a business, we wrote to the government and they explained what keystone was. But the salaries people made then are not livable today. To find the quality staff that we want, a minimum wage, or anything close to it, would not serve. We start well above that figure, and offer full health insurance benefits. Our approach to markup also takes into account the larger amount of time we spend at market finding the best quality product at the very lowest price. Sometimes we'll choose an item just for its value to the store's image. In that case, we'll do a smaller markup, closer to keystone. But overall, we don't have a fixed markup figure per item. We base it on what we feel is the value of the product.

Daniel Hill, Botanicals on the Park St. Louis, MO

We couldn't make it if we just had keystone markup. We have three stores, which means we had to get a warehouse, a truck, and extra staff. Our markup is set the way it is to pay for our backroom. Over the last 12 months we've been weeding out vendors that have suggested retail prices that are only double the wholesale price. We can't carry an item that a lot of other stores carry if they're only marking it up keystone. Over the past two years our gross margin has gone from 53 to 58 percent and we want to make sure we take care of our markup and keep it there — or do even better. We'll see what the market will bear. We've worked very hard to find vendors that offer better quality product, and we buy it in enough quantity to get a discount. That way we can offer it for the same price or less than we have been and still maintain our markup. We had to search out vendors that were willing to work with us on price. The ones that wouldn't are going bye-bye.

Patti Renner, Renner's Invitations Akron, OH

We have yet to get this down to a science. We try to maintain the 50 percent policy [wholesale cost is 50 percent of the suggested retail price] on most items. However, there are some that sell very well at a higher markup. There are also others that we're not convinced will do well even at keystone, but we want them in our store, so we price them a little below. Many times we price above keystone to offset shipping costs. I used to do 50 percent and add 25 or 50 cents to cover shipping costs. Now I reevaluate that based on the uniqueness of the product. Recently I compared the same item in three different shops — we charged $17.50, another store in our region charged $19.95, and one in New York City charged $24.95. That caused me to rethink our pricing strategy. We found that if a customer falls in love with the item for $17.50, they're not going to hesitate to buy it for $19.95. We're capitalists. We price according to what we think the consumer will pay.

Jill Wieder, Chelsea Galleries, Cleveland, OH

Keystone has not been the rule for quite a while. The cost of doing business is just too high. My average markup is 2.3 to 2.5 times wholesale. If I can't sell it at that price I don't buy it. The higher cost of the item, the more profit I make, so the lower the markup. I'm looking for less expensive items because people want to spend less, and I have leeway to mark them up more. I'm not trying to rip off the customer, I'm trying to mark up an item appropriately so that I earn a living but the customer also gets something of value. I try to buy things that no one else sells, and I just have to hope that people will buy from us because of the presentation and service that we provide. That's got to be worth a couple of extra dollars. As a business owner you have to have the confidence to be able to charge a little more, because the customer is not just purchasing your product, they're purchasing your knowledge, style, expertise, and education.