nickshanagher

What to make of all these price-match guarantees in the supermarkets? A profit guarantee for the shops offering them, suggests the Economist . In a column last month it says price guarantees were a way of stopping a price war rather than participating in one. This is because when a newcomer offers lower prices it is trying to win your customers. If you promise your customers that you will match these prices then they will stay with you. The newcomer then has to give the price cuts to its existing customers without winning new ones and loses money. In real life it is not as simple as that. However, the Economist says that most consumers believe that price-matching signals genuinely lower prices. The consumer is wrong as it is more expensive supermarkets that are offering to match each other’s prices. The lower prices are at Aldi and Lidl. The response of wholesalers and consumer packaged goods suppliers is to price mark product for independent shops to signal value. There are ...

There is an advertisement from Coca-Cola Enterprises in the last issue of Retail Newsagent of 2010 that says: "71 per cent of customers are more likely to buy a product with a price-marked pack." The research by HIM that supports this view is not particularly new but the execution of the advertisement by CCE is very impactful. It is illustrated with an array of 10 strong CCE brands in price-marked packs. The message underpins a huge change in what independent retailers are prepared to stock. When Mars, armed with similar insight, tried in the 1990s to champion price-marked products, the retail trade refused to stock its products. Today, shopkeepers understand the power of price-marking in generating sales and often seek out the price-marked option. However, with a fixed price comes a fixed margin. In making this trade off, retailers need to be clear about the overall impact on their sales and to get the mix of price-marked and higher margin products in the right balance. ...

Kevin Jones, who runs a shop in Hawarden, Clywd, has identified another tricky detail when the VAT rate jumps back up 2.5% to 17.5% in January: price-marked stock. In particular he is thinking about tobacco products, where the margins are already thin. Obviously, stock management from now to December will need to be good. Cigarettes are a product with a relatively high stockturn (you need to be sure that you sell through all your price-marked stock), which means that planning your buying ensures you avoid problems. Risk management requires planning ahead and attending to the detail so that you avoid losses. It doesn't increase your wealth but it simply has to be done.