Low prices can be beaten

For corner shopkeepers there are some signs that the major grocers are having a tough time in growing their share of the grocery market. While this does not mean that the pressure on your business will lessen, it does suggest that if you focus on your local market you will be able to combat the pressure.

“It only took 48 years,” was the FT’s pithy comment on Walmart’s first ever quarterly sales decline. Its UK arm, Asda, had a poor final quarter of the year, blaming snow that discouraged people from driving to its superstores.

Asda’s response will be to renew its focus on every day low pricing (EDLP) to, in the words of chief executive Andy Bond, “save our customers money on every basket each time they spend”.

Last year, Mr Bond suggests, Asda’s competitors with their high-low pricing strategies hoodwinked shoppers. In an online briefing he illustrated this by using a chart showing the price of a tube of Pringles in Asda, Sainsbury’s, Tesco and Morrisons.

Mr Bond suggested that while Asda’s price of a Pringles tube remained just £1 from September through to January, its competitor’s prices varied hugely month to month between £1 – 2.

While EDLP may put pressure on the supply chain to keep prices down (and your profit margins), the analysis of its rivals success suggests that shoppers are not fully convinced by Mr Bond’s strategy.

Value equals the difference between price and expectation. If people expect low prices and get them it is a neutral transaction. If people expect high prices and get a low one, they have added value!

Shoppers clearly like the supermarkets but their custom is there to be fought for. If shoppers think Asda is boring, what can you do to add value to their lives when they shop locally? Fight for their treat spending and their top-up spend.