Competing on price is not good for business as it is often a race to zero GP and below. The best competition is through a service, product range or some other factor over which you have more control.
Some UK retailers who sell through Amazon and use a service called RepricerExpress discovered Friday that competing on price could close their businesses. repricedExpress automatically drops the price of goods in response to the price of others. It seeks to ensure a retailer remains competitive. There was a glitch last Friday that saw the items of many small and independent online retailers drop to 1p.
Check out The Independent for the story.
On the broader issue of competing on price, the customers you win based solely on a price offer will not be loyal unless you maintain the low price (low GP) offer. Usually, that’s not good for business, especially if it is a big business with a bigger ad budget you’re up against.
I’d rather go the other way – have an offer so compelling that I can charge more and customers will pay happily for the privilege.
Mark – I couldnt agree more. I think heavy discounting is lazy retailing. The major supermarkets are struggling now as some (not all) suppliers are finally saying I cant afford this anymore so the big 2 suddenly cannot match last years sales spike.