Tuesday, April 13, 2010

Different paths to low prices

A low price strategy can be executed in several ways, but is always associated in low costs. While some retailers cut the range others go for better control through heavy investments in new technology.

C³I – Communication, Coordination, Control Intelligence. Military standard communication and command structures. Wal-Mart is the company that has invested most and earliest in new technology and built already in the eighties the worlds largest privately owned satellite network, in order to transfer sales data between different units in order to obtain the best possibles sales and stock control. Recently, Wal-Mart has pioneered in the RFID-sector

Volume and price warfare. Another Wal-Mart weapon that can be summed up in Sam Waltons productive loop. Contrary to traditional thinking where a greater demand is followed by price increases Wal-Mart re-invest in lower prices that will give even larger volumes.

- Time efficency Zara can within the course of two weeks get inpired by a piece of apparel on a catwalk in Paris and then let some of their 200 designers make a similar product, produce it and bring it to the stores, earlier than the originals will arrive to the store shelves.

Partnering with the customer. IKEAs idea to share the burden with their customers, creates an argument that the client should pay a lower price.

Cost superiority through purchase- and logisticsoptimizing. Aldis slimmed range of some 800 SKUs creates a stock turnover and sales volume per article that is previously unseen in retail history.

Innovative supplier relations. During the early 90-ies Wal-Mart and P&G piloted an project to eliminate unnecessary costs in the retailer-supplier relations. The result bacame known as scan based trading, where the supplier owns the stock until the very moment the consumer pays for it in the counter. The supplier is responsible for that the range is appropriate in all aspects and the retailer is responsible for creating floor traffic.

Private Labelstrategy where the retailer is responsible for everything except the very manufacturing of the products.o