Flow and requirements

Detailed flow of price control functionality with business requirements

According to legal requirements, the franchisor cannot impose prices on its franchisees. For this reason, a price control system was created, where the owner can create suggested prices for products.

In this system, the price manager can create or change the price of an item for a group of franchise stores, called Profile or Price Zone (depending on business structure). All stores within a Price Zone are guaranteed to be part of the same Profile. It means that wholesale price on Profile price will be the same for Price Zone price. Prices for a Profile or Price Zone are not mostly used for sales, but for the price management purposes. However if there are no store prices, price on Price Zone or Profile level is used when performing sale. Based on Profile or Price Zone sales price, the system creates suggestions of prices for the stores that belong to given HQ store group (Profile or Price Zone). The store manager can see generated suggestions in Price control view. Each suggestion contains information about the item and the price that triggered the creation, called the source price. The store manager can reject or accept generated suggestions. While accepting, the manager is able to modify the retail price. Based on the accepted suggestion, the system creates active or future sales price of the item in a specific store and adds a record to the suggestion history list. Price suggestions history tab contains information about the decision about the suggestions, which can be displayed by managers.

Sales price (or retail price) comprises several values: Net price amount, Gross profit amount (margin) and VAT.

1. The Net price is the cost of the item from the perspective of the store seller.

2. The Gross profit is the amount of profit a seller gets from selling an item.

3. Vat is a fractional value that represents tax that is added to the price of goods and services.

Sales price is calculated as follows:
Sales price = (Net price GrossProfit amount) * (1 + VAT) So if the NetPrice is 100, GrossProfit is 20 and VAT is 0.23 (means that VAT is 23%), the Sales price will be 100

20 = 120 * 1.23 = 147.6

The Net price consists of the Wholesale price and various discounts.

The system detects changes in item prices for Profiles or Price Zones and based on this, creates suggestions for item prices in stores belonging to given store group. Also, if the retailer is using Store assortment management functionality (defined in system parameters) when item is added to assortment of one of the stores, this action will also trigger the creation of store price suggestions for this item in this store.

Here, there's a list of covered use cases for change of price on Profile/Price zone level with the outcome of the system:

• Created/Updated Profile/Price Zone sales price for an item - no suggestion with same Valid from date, store, item exists - create suggestions for all stores within the store group.

• Updated Profile/Price Zone sales price for an item - suggestion with same Valid from date, store, item already exists - suggestion is updated with new data.

• Updated Profile/Price Zone sales price for an item - store is not a franchise store - nothing happens, no suggestions are created.

• Deleted Profile/Price Zone sales price for an item - suggestions with same Valid from date, store and item are deleted, since the source of suggestion is deleted as well.

• Created Profile/Price Zone sales price for an item with same sales price as previous - nothing happens, no suggestions are created.

• Created Profile/Price Zone sales price for an item with same sales price on store - nothing happens, no suggestions are created since there's no difference between sales price on profile/price zone level and store level.

Here's a list of use cases and their outcome for the retailer is using Store assortment management functionality:

• Item is added to assortment of the store - profile price is same as store price - nothing happens.

• Item is added to assortment of the store - profile price is different than store price - suggestion is created for store price.

• Item is removed from assortment of the store - all suggestions are for that item in that store.

• Add item to assortment of the store - profile price is different than store price - store is not franchise - nothing happens.

If no action is taken on the suggestion (acceptance or rejection), it will expire. In such case price control view would be full of outdated suggestions The system deletes all suggestions, that valid from date is in the past or still valid, except the newest suggestion for each item in each store. As a result, for each item in the store, there will be no more than one price suggestion in the past.

Here's a list of use cases and their outcome for such scenario:

• There is one price suggestion in the past - nothing.

• There are more price suggestions in the past - all except the newest suggestion are deleted.

• There is one price suggestion with current date and one in the past - only expired suggestions are deleted.

Wholesale price context in price control

Wholesale price is the price a retailer pays to a manufacturer for an item. This price is the same for all stores in the group of stores. So when the Wholesale price is changed on Profile or Price Zone, all prices in the group of stores should be updated. Since all stores in Price Zone are guaranteed to be part of the same Profile, changing the price in the Profile also changes the price in Price Zone. When Wholesale price is changed, the handler changes all the corresponding prices to configure the correct Wholesale price. In this case, no suggestions are made, the changes are applied directly to the relevant prices.

Changes are applied directly to the prices, because the Wholesale prices are independent of the store retailer. The sales price of the item can not be changed without store manager approval. Since the selling price is calculated based on the Net price, which depends on the wholesale price, Gross profit and VAT, which is imposed in advance by the legislature, a change in the wholesale price causes a corresponding change in the gross profit.

This means that the if wholesale price increased by 10 the gross profit should be lowered by 10 to keep the sales price the same. So an increase in wholesale price reduces retailer profits.

Here's a list of use cases related to change of wholesale price and their outcome for such scenario:

• Created Profile/Price Zone with same wholesale price as previous - nothing happens.

• Created Profile/Price Zone with different wholesale price than previous - no future profile price exists - all store prices in the group of stores, newer than created profile price, are updated.

• Created Profile/Price Zone with different wholesale price than previous - future profile price exists - all store prices in the group of stores, newer than created profile price and older than next profile price, are updated.

• Created Profile/Price Zone with different wholesale price than previous - store price is already active when profile price validity starts - new store price is created, it starts in same date as profile price.

• Created Profile with different wholesale price than previous - Price Zone price is different - Price Zone wholesale price is updated.

Keeping margin on wholesale prices in Price control

Change of wholesale price changes gross profits (Margin) of sales price. Wholesale price amount comes from supplier, so its change can be missed by profile manager, who may want to keep same gross profit as before. To prevent such situations, the system detects change of wholesale price without changing sales price on Profile or Price Zone level. Based on that, the system create suggestion of the price given that Profile or Price Zone. Only changes added by import are tracked in this manner, since manual changes are under Profile Managers control. The suggestion will have same margin as previous one and new wholesale price. So this suggestion suggest to change Sales price to keep margin from previous price and keep new wholesale price. Suggested price will be on the same level as source Price (Profile or Price Zone), so it will not have any impact on store sales price. However, approving the created suggestion, in other words creating a new profile price, will create a price suggestion at the store level with a new margin.

Here's a list of use cases for price suggestions based on changed wholesale price:

• Created Profile price with same wholesale and sales price - nothing happens.

• Created Profile price with new wholesale price - no suggestion exists - suggestion is created.

• Updated Profile price with new wholesale price - suggestion exists - suggestion is updated.

• Created Profile price with new sales price - suggestion exists - suggestion is deleted, since user decided themselves what the sales price would be.

• Create Profile price with new sales price - no suggestion exists - nothing happens.

Price control & Import

Since price changes can be applied to products using import - both via Excel and Mass update import, as well as integration import - changes in prices done by import will reflect in Price control panel as well. Following rules apply, when importing prices as HQ price manager:

• Imported Profile price with same wholesale and sales price - nothing happens.

• Imported Profile price with new wholesale price - no suggestion exists - suggestion is created.

• Imported Profile price with new wholesale price - suggestion exists - suggestion is updated.

• Imported Profile price with new sales price - suggestion exists - suggestion is deleted, since user decided themselves what the sales price would be.

• Imported Profile price with new sales price - no suggestion exists - nothing happens.