Price Factors in Retail Business

When the products offered to consumers are similar to those offered by your business competitors, and no differentiation is offered by you to the consumer, then the price is a factor to win the competition.

Strategy of using price as a competitive tool is usually done by a retailer who is already very big and very well established. As for small-scale retailers this strategy is less well to wear. This strategy requires a large capital that enables retailers plays with a lower margin for the product they have.

When a competitor sells a product at a price equal to the product you have, then you will be losing consumer. Especially if you have a store that does not have the uniqueness. So this is time to start the price war between your store with your competitors store.

If a retail store has a strong capital and act as a market leader, easiest and usually does is lower the profit margin on product sales they have. The principle is to retain existing customers, although now profit margins is reduced.

While for competitors who does not have big capital, then the thing he does is by the aggressive promotion, whether about the price and the store brands. The principle is to grab as many customers from market leader.

Actually doing the price war is something less good. Why? Because it would ruin the market itself. Competition becomes unhealthy because margins are obtained becomes less and less, and it usually causes hostility among the perpetrators.

In order for this price war does not undermine the existing market, then you should sit down with business people to determine agreement on the minimum margin. Competition changed into something healthier and more intelligent, by competing through quality of service. Business people are competing for each other achieve and maintain customer loyalty. Anyone who can maintain a loyal customer and achieve as much as possible so they can survive.

That is why "every business is a service business", because the service will create customer loyalty, and customer loyalty will make your store survive.