The economic pressure experienced in recent years has caused consumers to focus on saving and change their habits to pay less money for their shopping basket: change brands, compare prices, look for promotions and change where they buy.
As a consequence, food distribution has undergone a strong transformation of its business model, which has led to an acceleration in the development of private labels and has made the supermarket the preferred commercial format for much more austere consumers. Two changes to which Mercadona has been able to adapt, since in 2008 it decided to reduce expenses to lower the price of its products. A strategy that has made it possible for the giant chaired by Juan Roig to already have a market share of 21% in Spain.
In this sense, the only food distribution chains that increase their sales are the discount ones, while they decline in the rest. According to the annual report ‘Worldpanel Distribución 2013’, in Spain Mercadona, DIA, Alcampo and Salvamas were the most dynamic brands in 2012, as they have not only increased their market share, but also have more and more loyal customers . These four distribution chains, which have in common a clear focus on price, have also grown by having expanded their retail park in the last year.
Even El Corte Inglés has begun to lower prices to the maximum. Nine months after initiating a downward revision campaign for the prices of its products in El Corte Inglés, Hipercor and Supercor establishments, the emblematic distribution brand has taken stock of the results achieved and has confirmed that the strategy “is will keep permanently.
The strategy of ‘search, compare and if you find something better, buy it’ that Manuel Luque, former general director of CAMP, popularized in his day to advertise Colon detergent, has spread widely among the brands in the sector. Along these lines, Caprabo has recently launched an app to steal customers from Mercadona. The supermarket chain controlled by Eroski wants to show that it can be as competitive as Mercadona with the comparison of more than 2,500 references.
the mexican market
In Mexico, there are four supermarket chains with a significant share, Walmart being the largest of them both in terms of geographic coverage and market share (47%), followed by Soriana (18%), Comercial Mexicana (10%) and Chedraui ( 9%). The four brands follow very aggressive policies in terms of competitiveness, promotions and pricing strategies, which, although it has affected their margins, allowed them to obtain average growth of 10% and 9% in sales and Ebitda, respectively, in 2012 .
Most of these chains have a multi-format strategy, although Wal-Mart is the only one that has been able to reproduce all of its formats throughout the country, which has allowed it to expand its customer base and increase its market share.
“Currently, the Warehouse and Discount Store sector presents a very interesting area of ??opportunity for Walmart, since due to its size it can compete with popular markets, corner stores and mini-supermarkets,” explains Paola J. Sotelo. Bodegas Aurrera is the largest Walmart Group brand in Mexico. Its main strength is to have positioned itself as the chain of low prices. His communication can be described as empathetic and honest, generating an impression of accessibility for Mexican households.
The main benefits of a strategy of PBTD (Low Prices Every Day) for the distributor are clear:
- Achieve customer loyalty by passing on cost reductions to consumers in the form of lower prices and not confusing them with ongoing claims and discounts.
- Improve inventory management, avoiding excess stocks, as demand is more predictable.
- Reduce advertising costs as there are no constant offers.
- Improve the perception of quality and the value of the products, by not applying strong discounts on the original price.
Competitive pricing intelligence
But, in this context of generalized price reduction: nobody creates value? If everyone looks only at the price, who offers something different?
Most people move not only motivated by the price of an item but by the value it represents for them. The perception of value that a product or service has begins in the minds of people. For this reason, on many occasions the best-selling products or services are not exactly the cheapest. Research shows that consumers respond not just to price, but to how fair they think it is.
Competitive pricing intelligence is based on the use of analytics to create and optimize a dealer’s pricing strategy, with the goal of better competing in the marketplace and improving sales.
Competitive pricing intelligence software and platforms provide dealers with the tools they need to: analyze industry pricing, extract analytics to support business pricing decisions, and measure the effectiveness of the implemented pricing strategy.