The implementation of pricing strategies also comes into play for products in the supermarket. In fact, the battle to achieve the best prices is even tougher here than in other sectors due to the high concentration of edible products from various brands and with very similar characteristics. The appearance of new brands or new business models can threaten the retailers in the sector, who will have to reduce profit margins and find ways to maintain their market share. What other consequences can be suffered by these companies that offer basic necessities?
The first effect of entering a price war is the continued decline in prices, either naturally on strategic products or through promotions. Some physical or online supermarkets, to combat those who advertise themselves as “the lowest prices on…”, choose to launch aggressive offers that attract the attention of potential customers while risking a reduction in their profits. To compensate for this decline, some shops quietly raise the prices on other products, especially those of fruit, vegetables, and fresh items. This strategy can lead to dissatisfaction and the loss of more informed customers. Therefore, each act of repricing must be very well defined, based on studies of the market and the competition.
Brands can lose their value
The brands that are most committed to innovation and growth are those that will be the most affected by this price war. If they decide to enter into the game, they may have to lower their prices so much that they’ll lose any added value and difference value for buyers. Due to this tough competition, some brands have already had to withdraw from certain categories because they could not cope with the current product offering. In this situation, the launch of new products, both in eCommerce businesses and in physical stores, has to have a specific product to target.
In supermarkets, manufacturing companies also have to face the challenge of the low prices offered by private label brands. In most cases, a price war against these isn’t viable, given that their production and distribution costs are lower. On the contrary, a more successful strategy is to achieve good positioning in the customers’ ideology by building a history around your products, reaching the consumers sincerely and simply to gradually turn the brand into a benchmark in the sector.
The growth of online supermarkets
The price war over groceries is even more subtle in eCommerce businesses, where the movements of dynamic pricing can be more controlled. On the internet, not only do conventional supermarkets compete, which already have an online store, but customers can also place orders with younger, specialised companies that have an advantage.
In addition to price, delivery time also plays a key role in the war to dominate this sector. This is one of the factors that generate greater competition among eCommerce businesses since the customers put a great value on immediacy. This is why companies like Glovo, which is also responsible for the distribution of food and basic necessities, have carved a niche for themselves in the distribution chain.
Even though the introduction of new characters in this scenario, as is the case with Amazon, stands in the way of the profitability of companies, brands, and eCommerce businesses, they have to seek creative solutions that allow for the growth of their sales and of the loyalty of their customers.