Finding that Magic Price: Whole Foods, Aldi, WM & Target Join the Hunt
In a penny business, every cent counts so having the same everyday low price (EDLP) as the competition is good but if you can increase your prices a cent or two higher while still giving off the perception of being an EDLP leader that is ideal. In the pricing business, we call this the “Magic Price”.
Over the past month, we’ve seen retailers like Whole Foods, Target, and Aldi try to change their perception across the marketplace and announce their new lower pricing strategies while they try to find that magic price.
Low Price Leader Board Lighting Up With New Contestants
What Amazon learned through Amazon Fresh was that grocery shopping is more than obtaining commodities, it’s about delivering value. The problem is it’s difficult to deliver value when people assume you’re just too expensive, Amazon though had a game changer idea that would soon have a domino effect across the industry.
The first day Amazon took over Whole Foods, it lowered some prices as much as 43 percent according to Bloomberg. Some of those prices were on very inexpensive items—such as for Kale—but others were for pricier items like responsibly farmed tilapia and salmon, and almost immediately the shopper’s perception of Whole Pay Check began to change.
Amazon goes to battle wherever it competes and it’s a formidable foe. The New York Times referred to it as Jeff Bezos’ willingness to “inflict pain” on competitors. But Amazon isn’t the only player searching for this magic price.
German chains Aldi and Lidl are hard discounters also making strong moves that are likely to force US grocers to adjust their magic prices once again. Aldi came to the U.S. in 1976 and has 1,600 U.S. stores. It’s upgrading many of them as part of a $1.6 billion program. But Lidl, which also has many store-brand items and keeps costs low is planning to open its first 100 stores in the U.S. this year. Reuters reported that Wal-mart is pushing suppliers to beat rivals prices by 15%. Aldi, meanwhile, is aiming for more than 20 percent below competitors. Chain Storage also recently reported that Target is dropping thousands of prices to keep up with competition…
Getting Strategic Before the Holidays
With the holidays coming up, retailers are going to have to prepare for this new EDLP messaging from their new revived competitors and do their best to find that magic price for their key items to keep their margins in the black.
Latest posts by Seth Nagle (see all)
Comments are closed.