The margin you made at the desk - and lost at the counter
Ask most merchant MDs where margin goes and the answer is usually purchasing - supplier costs, buying group terms, rebate structures.
Those things matter, but a significant portion of margin in most merchant businesses is actually lost in the day-to-day mechanics of quoting and selling.
The core problem
In many merchant businesses, the person quoting or serving at the counter doesn't have a clear view of the margin they're working with. They know the selling price, and they may know the list price, but they often don't have a real-time picture of what margin a specific discount, substitution or pricing decision will produce on this order, for this customer, today.
When margin isn't visible at the point of pricing, it can't be protected there. It only becomes visible later - in a report, at month-end, or when someone sits down to analyse why the numbers came in below expectation.
Discount creep
Discount creep happens when discounts are applied informally, incrementally, and without a consistent reference point for what was actually agreed.
A customer mentions a competitor's price, and the counter staff matches it without checking the margin
A long-standing account gets an extra 5% 'as a goodwill gesture' that somehow becomes their standard rate
A discount applied on one order gets referenced by the customer on the next, and accepted without challenge
Different branches or staff members apply different rates to the same customer, with no system to enforce consistency
None of these is a significant event in isolation, but across a month of trading, across all customers and all counter staff, the cumulative effect on margin can be substantial - and it's almost impossible to attribute after the fact without line-level margin data on every transaction.
Manual price overrides
Most merchant businesses have customer-specific pricing agreements - negotiated rates, volume terms, contract pricing for specific jobs. The question is where those agreements live and how reliably they're applied.
When pricing agreements are held in spreadsheets, in a shared document, or in the memory of the account manager who negotiated them, overrides at the point of order are inevitable. The counter staff serving a customer on a busy day don't have time to cross-reference an external price list, so they apply their best estimate of what the customer should be paying, which may or may not match what was actually agreed.
The result is pricing inconsistency in both directions: customers who negotiated good terms don't always get them, and customers who didn't negotiate special terms sometimes receive them anyway.
A system that enforces agreed pricing automatically - applying the correct price list for each customer at the point of order entry, without relying on staff to look it up - removes the override problem at source rather than trying to audit for it after the fact.
Slow cost data: quoting at yesterday's margin
NBG, the building materials buying group, reported over 200,000 price and product changes to its PIM every month - peaking at 352,000 in January 2024 alone (Professional Builders Merchant, June 2024).
Any merchant still manually loading supplier price changes from spreadsheets - or waiting for a scheduled update to run - is working with a lag between costs going up and the system reflecting reality. Quotes issued during that lag are priced at last week's margin. If costs have risen, the business is absorbing the difference.
This is particularly acute on higher-margin, higher-value products where even a small cost movement has a meaningful impact. A system that takes supplier price updates directly and applies them to pricing in real time closes this gap rather than leaving it as a routine source of invisible margin erosion.
The quote-to-invoice gap
A quote goes out at an agreed margin. Between quote and invoice, things change: a product is substituted, an extra delivery is added informally, a cost comes in differently than expected. By the time the invoice is raised, the margin on the job is different from what was quoted.
Without the system tying quote to order to invoice - maintaining a connected record of what was agreed, what changed, and what was eventually charged - that gap is invisible.
What the right system needs to do
Margin protection at the point of pricing isn't about restricting what staff can do - it's about giving them the information to make good decisions, and catching the ones that fall outside agreed parameters.
A system built for merchant trade should:
Show margin at line level and order level in real time as a quote or order is being built
Enforce customer-specific pricing automatically, without relying on staff to apply it manually
Alert when a discount would take margin below a defined minimum threshold - and optionally require authorisation to proceed
Apply supplier cost updates to pricing promptly, so quotes reflect current rather than historical costs
Maintain the connection from quote to order to invoice, flagging changes that affect margin along the way
How Merchanter handles pricing and margin control
Merchanter's pricing engine is built around the reality of merchant trade: customer-specific price lists, trade pricing tiers, volume discounts and contract pricing applied automatically at the point of order entry. Staff see margin at line level as they quote, and thresholds can be set to flag or restrict discounts that would take a job below an acceptable level.
Supplier cost updates flow through to pricing automatically, reducing the lag between a price change landing and quotes going out at the wrong margin.
Key principles
Margin erosion at the point of pricing is cumulative and diffuse - it doesn't show up as a single event, which is why it persists.
Discount creep happens when discounts are applied without margin visibility and without a system to enforce what was actually agreed.
Manual price overrides are the result of pricing agreements held outside the system - the fix is enforcing them within it.
Supplier cost data needs to be current in the system for quotes to reflect accurate margins, not last week's costs.
The quote-to-invoice chain needs to be maintained in the system so that changes to scope or price don't silently erode the margin that was agreed at quote stage.
Want to see how Merchanter handles pricing and margin control?
Book a call at merchanter.com/bookacall and we'll walk through how your pricing structure would work in the system.
