Site MapHelpFeedbackCasing the Web
Casing the Web
(See related pages)

Everyday Low Pricing

Wal-Mart, Kmart, and wholesale clubs such as Costco have had great success with a concept they call everyday low pricing (EDLP). Rather than have relatively high prices and then bombard consumers with coupons and price discounts (a high–low pricing strategy), such stores promote the fact that they offer lower prices every day. Similarly, some manufacturers are offering everyday low purchase prices. Instead of having a relatively high price for products sold to retailers, manufacturers such as Procter & Gamble have everyday low purchase prices. It's the same concept as EDLP applied to industrial goods instead of consumer goods.

Many retailers have decided to follow the lead of Wal-Mart and others by cutting prices on all their goods. But recent research shows that this isn't always wise. Dominick's Finer Foods, with 28percent of the Chicago-area food business, tried an EDLP policy and boosted sales by 3 percent— yet profits declined by 18 percent. It has been calculated, in fact, that supermarket volume would have to increase by 39 percent for supermarkets to avoid losing money after a 7 percent price drop. Consumers say location is usually their most important factor in choosing a supermarket. Thus, supermarkets shouldn't have to have the lowest prices to keep market share.

Usually sales volume falls after the introduction of everyday low prices, but it picks up later. That is true in Europe as well as in the United States.

In spite of the potential drawbacks of everyday low pricing, 7-Eleven implemented it in 250stores in the Dallas–Fort Worth area. This pricing policy was just one part of an overall revamping of 7-Eleven's image that included updated interiors, fresh produce, and gourmet items. In fact, 7-Eleven wants to shed its image as a high-priced convenience store and is seeking to appear as a small yet viable alternative to supermarkets.

1
As a consumer, would you prefer that your local supermarket offer everyday low prices, offer some products at major discounts (half off) periodically, or offer some combination of the two?
2
What could your local supermarket do other than offer low prices or price discounts to win your business (delight you) and still maintain a high profit margin?
3
What advantages and disadvantages do you see for manufacturers to offer everyday low purchase prices to retailers? Are manufacturers and retailers pushing price so much that they're in danger of lowering profits? Is this especially true on the Internet? Why is price competition so common?







Nickels: Undstd Business 9eOnline Learning Center

Home > Chapter 14 > Casing the Web