Retail & e-commerce
Target Buying Price
From a target shelf price back to the maximum invoiced buying price.
The problem
Annual negotiation opens on the supplier list price and argues it line by line. The binding constraint sits downstream: the price the item has to sell at to hold its competitive position and fund its promotional plan. Starting from list price means securing a reduction that falls short, with no way of knowing by how much, or which line of the deal should carry the rest.
The reverse calculation already exists in most organisations, at a rate of one spreadsheet per buyer, each with its own convention for handling back margin and promotional funding. Nothing consolidates, and the opening position cannot be arbitrated at category level, so each buyer negotiates against a different definition of margin. One convention, applied across the full line list, makes positions comparable from one buyer to the next.
Target Buying Price
How to read the result
Input
- Target shelf price including VAT, and the VAT rate, after competitive alignment
- Promotional mechanic: depth and share of volume
- Front margin targeted, as a share of the ex-VAT shelf price and measured on the invoiced price before rebates
- Contracted back margin and expected promotional funding, as a % of the invoiced price: they do not move the ceiling, they give the triple net price reached at that ceiling
- xlsx or CSV import for line-by-line processing, with column headings recognised in French, English, German and Spanish, and export of inputs and results
How to read the result
- The figure is not an opening position, it is a ceiling on what is acceptable
- The gap to current list price sizes the reduction required, in value and as a relative percentage of that price
- The breakdown shows where that reduction can sit: a lower invoiced price, back margin or promotional funding, split in proportion to their weight at the ceiling
- What follows: negotiate, revise the target price, or delist the item
Limits
- The ceiling ignores the retailer's weight with that supplier and where the negotiation sits in the calendar, though its commercial realism depends on both.
- Back margin is counted as earned. A rebate tier missed at year end removes it retrospectively, while the shelf price it funded has been trading all year.
- Shrink, unknown loss, returns and logistics costs stay outside the calculation. On fresh categories the gap to realised margin is material. The tool checks neither the increased resale-at-a-loss threshold nor the caps on promotions in value and in volume for food products: the regulatory framework is to be confirmed and changes, no check is coded, and the ceiling is a negotiation ceiling, not a legal price.
- Import runs no consistency check across rows: two items from one range can demand contradictory concessions from the same supplier.
The exported file is internal preparation material. It is not meant to travel as far as the supplier. An unreadable entry leaves the last valid value in place with a message, and any value brought back to a limit is flagged. Numbers are read according to the language of the page: comma or point in French, point in English, comma in German and Spanish.
In the glossary
A first thirty-minute conversation
The tool gives the order of magnitude. The decision that follows can be discussed in thirty minutes.