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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 which 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 shoppers were hoodwinked by its competitors with their high-low pricing strategies. In an online briefing he illustrated this by using a chart showing the price of a tube of Pringles in Asda, Sainsbury, Tesco and Morrisons.

It started with Asda and Tesco at £1 and the other two at £1.60 in September*. The next month Asda was £1 and the other three were £2. The next month three were at £1 and Sainsbury were at £2. The next month Asda is down to 85p, Sainsbury and Morrisons at £1 and Tesco at £1.60. This month, Asda is at 85p and the other three are at £2. Andy Bond video briefing on Asda's 2009 full year results">

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.

*pricing is approximate as the chart was small
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