More and more manufacturers are responding to retailers' requests for everyday low pricing (EDLP). Last year, about two-thirds of all HBC promotions carried an EDLP notation. In many cases, accrual allowances were added.
Much of this industry trend has developed as a result of Wal-Mart's EDLP strategy. Much of the mega-retailer's ability to make an everyday low price strategy work flows from the fact that it has flushed a great deal of costs out of the distribution system. These lower costs enable Wal-Mart to pass savings onto the consumer. Many others, however, have not been as successful in reducing costs and do not have the financial foundation for an effective EDLP policy.
Indeed, it has been suggested that by attempting EDLP on this basis, a company is shortchanging itself and its customers because it is not in a position to promote brands or its banner as deeply or as well.
Promotion is a key part of brand success and many retailers believe it can be done better by promoting products or, put another way, by lowering prices on a scheduled basis. Doing so, it is argued, will bring consumers into the store for promoted items as opposed to everyday low prices.
It is clear promotion is necessary to keep the store and brands in front of the consumer. Just consider Sunday newspaper ads and coupons.
Consumers look at both EDLP and promotional retailers when they go shopping. Where is it more fun for the consumer to shop? Many retailers believe it is in a store where shoppers have come to expect the excitement of special offers and promotions, not one where the environment is always the same.
If a merchant wants to develop an environment that creates this level of excitement, one way to do it is initiate programs that invite consumers to come in and look around to find what is new, different and interesting that day. Unless a retailer can really compete with everyday low prices, it's important to find other ways to get the consumer into the store. Heavier promotion is a tried, true and viable alternative.
Discussions Questions: Is EDLP compatible with non-price competition programs or does a retailer need the excitement of price promotion to make those initiatives work? How do retailers and their supplier partners make EDLP a more exciting competitive program?