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GRocery Retail Expert Finds Both Pricing and Format as Important Strategies

Newswise - "Both pricing and format strategy are important when considering the retail strategy of stores," says Dinesh Gauri, assistant professor of marketing in the Whitman School of Management at Syracuse University. These recent findings by Gauri are based on research that took into consideration both the format of the store - i.e. whether it is a small convenience store, a supermarket, or a super center - and the stores' pricing strategy. Typically, stores either adopt the 'high-low' (Hi-Lo) pricing strategy, where promotions vary week to week, or the 'every-day-low-price' (EDLP) strategy, where most items on a regular basis are consistently low priced. Findings of the research indicate that although some combinations are more similar than others, considering only the pricing or only the format strategy in isolation fails to represent a complete picture, and the strategic implications change significantly when both format and pricing strategies are studied in combination.

Gauri's findings indicate that consumers patronize three types of grocery store concepts: the regular supermarkets, the every-day-low-price stores, and the discount stores. "Conforming to any of these three concepts will increase the sales potential of the stores," Gauri says." His findings suggest that stores like Fresh & Easy, a subsidiary of the UK based food retailer Tesco, or Wal-Mart's new Marketside, may be unsuccessful if they fall outside the traditional concepts with which consumers are comfortable.

"It might be an uphill task for even big brand names like Wal-Mart if they introduce an uncommon concept in grocery retail," Gauri explains. "What matters to the consumer is the format of the store and the store's pricing strategy. Consumers feel comfortable with stores that offer low-prices and only a small number of items, or supermarkets that offer a variety of assortment and may follow either Hi-Lo or an EDLP pricing strategy. Any deviation from these concepts is risky for a grocery retailer."

 

Source: Whitman School at Syracuse University