Retail Marketing

4a.What is the differences between 2 major forms of retail pricing strategy? How effective do you think they are for the retailers?

Introduction:

The pricing strategy a retailer adopts normally rests upon the consumer demand and profitability considerations. Retailers need to ascertain what their business concept is, before choosing a pricing strategy which is most apt for them.

There are 4 dimensions of retail pricing that businesses need to consider: Comparative (i.e. comparing the prices of the same good at competing store to gauge the price to charge), Geographical (i.e. the location in which the business is situated in), Assortment (i.e. the determination of the range, and depth of goods available), and Time (e.g. the nature of the products whose prices tend to vary with the seasons). Let us now look at 2 major forms of retail pricing strategies:

Everyday Low Pricing (EDLP):

This pricing strategy involves retailers charging a low price on most of its products, for a sustained period of time. Seasonal promotions and sales are a premium for retailers who engage in EDLP, who do not necessarily charge the lowest price in the market, but rather a constantly low price which remains competitive.

Advantages:

Perception of fairness:

EDLP allows retailers to concentrate on creating a market position that evokes a sense of fairness in pricing (e.g. NTUC FairPrice has a cost leadership strategy which involves selling goods at low prices. Hence, consumers feel they are not being cheated into paying marked-up prices).

Reduced advertising costs:

Once EDLP retailers become synonymous with cost-efficient shopping experience, the savings on advertising can be used to boost other aspects of the business, such as enhancing supply chain management (e.g. Sheng Siong supermarket attempts to keep its prices low to consumers, by streamlining its supply chain and eliminating the middle man).

Improved customer service management:

As sales periods are at a...