The Low Retail Price Strategy

INTRODUCTION:

Environment of United Kingdom retail Market:

The trading atmosphere in the UK is very challenging, and different corporations are using various methods to stay in business. In order to understand how corporations manage to remain in the competition with low prices Strategy this information will center on a particular area, which has all the time occupied our attention. The low price Strategy is a possible environment. In order to take action to this matter we are going to carry some retailing companies those are well reputable or well known for their deal opportunities in the UK market such as “Poundland” and “Primark” in the last 5 years.

The UK market is very challenging, due to the variety of the residents, and also the significance of the currency which is dissimilar from other countries in Europe. Furthermore the economy of UK develops faster than regular throughout the Europe. (ec.europa.eu/economy)

This is a situation where cost is going up due to the boost of the not only VAT in the kingdom, and where a few companies are leaving the industry due to the no profitability of their business. The UK marketplace keep on to battle against slump, as a result fears over job safety, tax increases and slash in government expenditure are the main issues. The retail surroundings go on to see numerous come to an end, as “Woolworths”; and some companies are ongoing by using unification or an acquisition. On the other hand “Iceland” has purchased about fifty stores with “Bargain Madness”, “99p stores”, and “Poundland” is also acquiring a number of “Woolworth’s stores”.

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Furthermore, the market is at price wars; this takes place as a result of the slump. Waitrose, Asda and Tesco all expanded and extended their reduction lines in order to challenge the growing share of discounters such as Lidl. (Supermarkets Business Analysis 2011, UK).

If we talk to any regular customer and discus with them about some of excellence, leading big super stores. The probability is far above the ground that one of the initial words they will say will be “costly”. Not “outstanding service”, “wonderful variety” or level “cooperative employees”. On the other hand “costly but attractive”, or “You get what you pay for”, but in the minds of normal customers, cost is approximately for eternity a mean aspect.

A pricing strategy is a strategy where a business proposes a comparatively low price to rouse stipulate and increase market share and to attract more customers to offer them good prices and quality products. It is individual of 3 broad marketing strategies that could be able to implement by any super store. Therefore these are generally engaged where the manufactured goods have little or no cutthroat benefit or where financial system of level is attainable with advanced manufacture quantity. Also called low price strategy.

In United Kingdom low pricing strategy is used as well and often by several super stores. Therefore it fallout in pricing their goods or services too near to the ground. Many super stores consider that containing the lowest cost in the marketplace will create them unbeaten. It believes that super stores can obtain business from their rivals cleanly by circulating the lowest price.

The Poundland Story:

The Poundland is the Europe’s largest only price cut rate seller and won the officially year 2011 Discount Retailer of the Year honour. It has more than 400 outlets across the United Kingdom, also together with Northern Ireland and it trade a broad variety of very quality top product and hold brand goods all for the only price end of £1 only, as long as offering the consumers with remarkable price each day.

This store serve up to Four million regular customers each week, It is an appealing shopping familiarity where customers are certain to purchase more than 3 thousands value goods and up to on thousand Top product, crosswise 17 shopping classes together with groceries and drink, health and beauty, domestic, crop growing, DIY, Animal food, Stationery, books, movies and Toys. Among a expansion policy of at slightest Sixty new outlets each year, Poundland is just the once yet again on way to generate more than Two thousands new employments.

Till 2012 the 22 new outlets are have by now opened as well as Four in the Republic of Ireland. Last April, Poundland accomplish one more landmark by building its 400th outlet in Haringey, in the London city.

Poundland has opened a new 200,000 four-sided figure in the south eastern delivery centre this month Huddleston, Hertfordshire area. The stockroom will sustain Poundland’s expansion policy and also will become as a provincial competence to overhaul its outlets all through the England.

The United Kingdom customers hang about underneath heaviness as for consequence of the continuing hard financial circumstances that feat in the United Kingdom and in the rest of the Europe. The goods are of growing value to dare consumers from all socioeconomic crowds. Despite the confront of the financial system and the aggressive atmosphere, Poundland is predictable to carry out strongly in the near-term time.

Jim McCarthy, Poundland’s CEO, states: “Poundland carry on to present astonishing value to more than Four million consumers each week. Our well-built trade and volume boost show that consumers distinguish the outstanding worth for cash that our outlets propose.”

The Story of the Primark:

The Primark is a clothing dealer; it is widely running in the Ireland, the Portugal, the Netherlands, Belgium, Spain, United Kingdom and Germany. It runs a whole of 1986 outlets with 38 in Ireland, 138 in the United Kingdom, 14 in Spain, 2 in Germany, 1 in Belgium 2 in Portugal and 1 in the Netherlands. On the other hand the corporation major center of operations are situated in Ireland while its operate as Penneys, the string is a contributory of Associated British Foods plc (ABF), and therefore eventually handled by the Weston family from side to side Wittington Investments. The corporation location itself as selling stylish clothing at cutthroat cost.

The Low Price Promise of Primark:

Primark can meet the expense of to put forward our consumers low cost by make use of a number of price saving policy. Primark has no promotion costs. Therefore it as an alternative relying on its customers “doing the discussion” about its products. in addition, Primark purchase and put up for sale in mass size. The Primark have more than 229 outlets in Ireland, and in the United Kingdom, The Netherlands, Spain, , Belgium, Portugal and Germany. The Primarks purchasing power tolerates to purchase in mass size and it bypass the price reserves support to the purchaser. Therefore it remain outlay low where on earth is possible. Through modern supply pact to its outlets to have updated current style, as it appears in the open fashion market.

Meanwhile the Primark has attain this in add up to of traditions together with heartbreaking into urban area, high streets position in larger, in additional prosperous position. It no more aim exclusively the near to the ground income consumer and therefore this is the primary target marketplace is “youthful, style conscious less than 35s” those who wish the stylish clothing at cutthroat cost. It helps these customers and is no more self-conscious to be distinguishing wearing low-cost garments trademarks. Primark is been mark in fashion magazine “Vogue”, as well as famous person were also seen wearing its clothing many times.

Major fundamentals of Primark:

Primark has continuous hurried expansion through cautious variety of locality in most important areas in the cities.

Primark has enhanced outlets layouts which are further good-looking and customer forthcoming.

Primark has trade the most up-to-date style goods at cutthroat cost from contractors from across the world.

Primark has an managerial ethnicity that seats a much better importance on good customer services.

Primark has draw soaring excellence workforce with a variety of trading ability and awareness.

Primark has attained financial system of level as quantity of supply raise.

Primark has advertising characteristic celebrities wearing Primark products

Factor that contributed to successful research questions:-

Being in such a competitive market, poundland and Primark are still in good business and it prompts questions that how can a super store manage to get profit and can survive for longer period of time by adopting a low cost strategy. Factors that need to be researched are whether they are managing their business by keeping low profit margins or by keeping the low quality of products or only by focusing on target marketing strategy and cheap labor rates.

Our research will identify and investigate, what is the strategy that works out for them and what is the reason that makes them successful by keeping a low price strategy.

Research Question:

How a super store can earn Profit when it reduces its prices to beat the Rivals?

Why are some Companies trying to include a low retail price strategy?

Why Customers do attracted more towards the Low Price instead of Quality?

Research Objectives:

Conclude how Poundland and Primark can be capable of applying a low price strategy and stay Profitable?

Which strategies or methods the companies must apply, to achieve a low cost strategy?

Research Hypothesis:

The low price Strategy will facilitate a business to catch the attention and keep hold of customers.

Reason for the research:

The Main reason of this research is to find out why Low Price Strategy is Important and how one super store can work on it for a long time and how it can earn profit as compared to its rivals. Moreover, what will be the impact of this strategy in the UK market and what methods and strategies can be used to keep it continue.

Aims:

To reduce the price of the items mostly sell at the stores to increase the sales and to attract more customers, to increase the market share as compared to the rivals. And to keep the good will of the super store.

Objectives:

This is to understand the future responsibility for improvement of productivity level. It has to analyze its sales Strategy and the prices as compared to rivals.

The pricing is an important factor because it’s related to the sales of the products and also affects the other marketing mix elements such as products features, channels decisions and promotions etc.

The super store just need to develop a marketing strategy, for that it has to perform marketing analysis, segmentation targets and locations of the stores, defining the products, distributions and promotional tactics. Meanwhile it has to include fixed and variable costs associated with the product. And to focus the likely competitors policies. After collecting the all information the super store needs to selects the pricing methods to develop the pricing structure and define the discounts and offers on the products.

Literature review:

Low price Strategy is a pricing strategy in which a super store suggests a comparatively low price to motivate demand and gain market share. (Business dictionary, 2011),

The link among low price and profitability is not as simple; the analysis of some writings on the subject will be prepared in order to have an understandable idea of the topic; which is determinant for companies to stay challenging, and make bigger or increase their market share.

(Web-Books, 2011)

The Porter’s Generic Strategies:

The Porter’s Generic Strategies is the best suitable tool to study the role and need of low price strategy for the selected companies, following is the brief review this strategy.

The Cost Leadership:

This strategy works on the super store by engaging market share to tempt to price-sensitive consumers. It can be attain by offering the lowest cost in the key market region, or having the lowest cost to cost ratio. Therefore to be thriving at offering the lowest price as still achieving profit and a soaring return on plan, the super store has to be able to work at a lesser cost than its rivals. (Web-Books, 2011)

The first move is attaining a high asset return. It will involve manufacturing of high quantity of production. These come up to mean the fixed costs are spread over a bigger number of units of the products, ensuing in a lesser unit expenditure. Higher intensity of output both need and result in soaring market share, and generate an entry barrier to possible rivals, who may not capable to get the scale required to go with the firm’s low costs and prices. (Web-Books, 2011)

Also it is important to attain low direct and indirect working costs. This is attaining by offering high level of standardized goods, offering necessary basic products and restrictive customization and personalization of service. The Manufacturing expenses are kept lowest by using fewer components or equipments, and also by using standard components or the equipments, and by avoiding the amount of form produced to make sure larger produced run. Expenses are reserved low by paying low salary, locating building in low rent areas, setting up an economical background, etc. (Web-Books, 2011)

The Differentiation Strategy:

The differentiation strategy is appropriate where the target shoppers are not caring about the prices of the products. On the other hand the market is cut-throat and shoppers have very precise needs and choices and which are perhaps under-served, and mean while the store has perfect resources and prospective which let them to fulfil their needs in ways that are tough to copy. (Web-Books, 2011)

The Alternative on the Differentiation Strategy:

The Strategy that extends a large base of resources that gives out the store to survive against the rivals by using a differentiation strategy. A super store with larger resources can manage threat and sustain income more simply than one with less resources. This deep-pocket strategy gives a short-term benefit only. If a super store requires the capability for frequent improvement, it will not carry on its competitive place in sector. (Web-Books, 2011)

The Focus or Strategic Scope:

A focused strategy must target market sector that are not as much of vulnerable to alternative or where a rivalry is weakest to produce above-average return on asset. By assuming a broad spotlight level and the standard is unaffected and the store must set up the requirements for the mass market, and to battle either on low cost or differentiation (feature, product name) depending on its income and skill level. (Web-Books, 2011)

The Low Pricing Strategy:

The Pricing strategy depends on three major faces: cost and profit objectives, customer’s requirement and competition. Meanwhile to patch up the price, primary add all the expanses and deduct any other cause of income in this way the least amount of profit will be accessible, On the other hand it will provide least amount of the price. At this time it can be measured as customers and the demand for any product to determine the upper limit selling price. In the last part, once having the price choice, and to use revenue objectives in a sequence about the competition to decide the best price. (Dana Griffin, 1999).

The most frequent pricing strategies are: “Price it Below the Competition.” If Primark and Poundland, the two major market companies, It is possible that this thing could happened that when these two companies adopt this policy therefore deliberately and in a marketplace whose formation and consumers make the lowest-price approach feasible These tow companies will have to a based on cutthroat improvement for themselves. And if they don’t, then there will be a possibility that there will be a price war that will put down and their rivalry with minor Profits and minor cost earlier than.

The Low Pricing is the most key mechanism of marketing and sales policy, which is a part of a complete business preparation. Conveying manufactured goods cost is a strategic action. The price which these tow companies will allocate will show how customers analyze their manufactured goods and whether they will buy it. Cost also helps distinguish the manufactured goods from the other rivals. Though, the cost that set should be in stroke with the other marketing policy and the manufactured goods characteristic. Meanwhile these two companies introduce a proper marketing arrangement, creating some of the examiner essential for a marketing map earlier to influential the pricing policy it will execute and is significant. The information achieve from the study will assist in turning over suitable cost to the goods or services.

The Pricing Strategy:

The Pricing Strategy is principally based on the Cost, the based on the Demand or the based on the Competition Consequently the cost-based price, the cost are simply planned on producer’s costs and the mandatory profit inclusive of bearing in mind the requisite. On the other hand the demand-based pricing, customers study helps to determine the suitable price choice, after that it can be conclude profit and cost. While the competition-based pricing, the prices are stand on the rivals. After all depending on consumer’s devotion, or brand differentiation. “(Dana Griffin, 1999)”.

The 4 Key Pricing Strategies:

There was a time when most of the companies used to suggest the prices for their every product and wholesaler minimally charged that prices. Any differentiation then was simply on convenience, environment, manufactured goods diversity and value of service of the seller at that time. Here are the 4 main policies:

Hi-Lo Pricing Strategy:

To commence a diverse factor of differentiation, a big figure of seller going ahead dropping the cost of means goods, in command towards grasp the awareness of consumers keen on their stores, therefore they would purchase erstwhile produce as fine as the reduced-prices. Therefore Hi-Lo pricing was happening, and in the mean time it swiftly became the model everywhere. The seller earned little income or even a faced loss but on the other hand; on the price-reduced produce revert to the income in the better sales of other useful lines. The Hi-Lo pricing also found an aspect of fervour into shopping for consumers – and the customers felt good when they had experience the excellent good deal, and this would be able to persuade them to revisit the same store. “Peter Clark (co-author, The Loyalty Guide)”

The Every Day Low Pricing Strategy:

This strategy is used to attract to the even more straightforward customers, and to make easier and helpful shopping for those customers who don’t have enough time for shopping. Meanwhile on the other hand other retailer gears this pricing policy so they could incriminate a realistic, but low-as-possible cost for all products they offer inside the store to sell. It is very popular these days. For those customers from whom shopping is an unpleasant task to be handle as easily and swiftly as possible, This strategy is the best solution. There is no need to shop here and there and there is no need to collect the vouchers, also there is any need to waste the time. Meanwhile, this approach shows the face up to the retailer; therefore within the nonexistence of further differentiators of some dependability demonstrates is to the cost charged, not to the selling. So the customers force desert to a rival who start to incriminate somewhat lesser cost.

The Profit Up Front Strategy:

About 3 decades ago, Hi-Lo pricing and EDLP were transformed into a new strategy which was known as Profit-up-front pricing. In this strategy customers were bound to get the unique membership and they were privileged to get special discount on products at extremely at very low price as known as whole sale price. All they had to pay some fixed annual or monthly price. It also depends on super store to super store how much they charge or whether they charge their customers on monthly basis or annual basis. “Peter Clark (co-author, The Loyalty Guide)”

The Access Pricing Strategy:

The main aspect of the Strategy is to offer to differentiate the prices on necessary items among regular and irregular customers in an open and noticeable way. Consequently it is tough for the superstores to propose higher prices to the habitual customers and low prices to the irregular customers within the similar market. But in few developed countries there was a problem that why a poor people should pay more than rich regular customers? Currently this strategy is available in most store and business outlets as a points-based loyalty card one the example is Nectar Card. “Peter Clark (co-author, The Loyalty Guide)”

Generic approach and business Forces:

Industry

Force

Generic Strategies

Cost Leadership

Differentiation

Spotlight

Entry

Barriers

Capability to slash cost within reprisal prevents possible entrants.

Shopper trustworthiness is able to discourage possible entrants.

The focus increase center competencies that can take act as an entrance barrier.

Buyer

Power

Capability to propose minor price to powerful buyers.

Great consumer has fewer influences to agree because of few close substitutes.

The large buyer has less influence to bargain as of little substitutes.

Supplier

Power

Enhanced protect from commanding suppliers.

To able to exceed on providers price increase to the consumers.

The retailer has authority of low quantity, other than a differentiation-focused is well again nurture to avoid on provider price as increases.

Threat of

Substitutes

Be able to use low cost to defend beside alternate.

Customers turn into close to distinguish quality, reducing risk of substitutes.

Meanwhile particular supplies & core competencies support against the alternates.

Rivalry

Improved able to battle on price.

Product authenticity to keep consumers from rivals.

Competitor cannot collect differentiation-focused customer requirements.

(Quick-mba, 2011)

As given above there is a plain clarification that how to stay or attain a low price strategy and being the existing super store and it can use cost leadership strategy to create barriers to entry of new rivals. The key strategy which is motivating for the reason of this report is the price direction. This facilitate business not only to boost their market share, but also to avoid competitors from concern the same strategy, as there is a difficulty from entrant as their price is low. Low price Strategy is based on the ability of the super store to create and bring products of competitive quality at lower cost. This figure expresses as well that to make it in the low cost Strategy, the need to have strong relationships with supplier. According to “Alagse.com” website on “customer focused low cost leadership strategy”, one vital point as well to succeed in the low cost Strategy’s to construct a strong relationship with supplier; as they have control over their inbound supplies and logistics. Therefore, business can make sure suppliers of the stability of the command; as for the suppliers, it is the promise of supplies on a habitual basis which introduce mainly. (Alagse.com)

Research Methodology:

Definition: Pattron (2009, online) defined research methodology as “a very intellectual human action used in the examination of nature and issue and deals distinctively with the way in which facts is collected, analyzed and interpreted.”

The reason to execute the study to find out answers of the questions from side to side the use of logical measures. The key aim of this research is to discover out the accuracy which is unseen and that has to uncover.

Approach to the research scope:-

The span of my inspection is to examine the issue that make the low cost strategy successful in retail business in the United Kingdom Market.

The research objectives and questions are designed in a way so that they first explore how companies in retail industry are making profits by adopting low cost strategy. This research will also examine why customers get attracted by low cost products more and can do negotiation on feature and factors while they make a purchase.

Also in this research, descriptive technique of research has been used and investigation questionnaires was spread among the random people with the help of social networking websites like facebook, and linkedin to get the response that inspect the research questions.

I have carry out a preliminary literature review to investigate what other authors write about my research topic. All findings in this literature review are meant to serve as a bottom for with the consequences of my prime data collection. The comparison between the two will help to either prove or disprove my research hypothesis.

Deductive Research Approach & the Targeted Participants:

The subsequent information will center on 2 companies successful in the United Kingdom retailing market, as they are famous for using a low price Strategy (Primark & Poundland). The use of the survey sample (see appendix) that have been published online among males and females; feedbacks established by discussing with customers around selected retailing business; report from chosen companies; and finally information found in some particular reports and books will help to review the facts and figures composed, this in arrange to have a improved plan of the low price Strategy.

Research Techniques:

This report will be using 2 types of process together and analyze information. However data will be gathered from secondary and primary data or through quantitative and qualitative. Qualitative research methods are a mixture of balanced, explorative and spontaneous.

(Van Maanen, 1983; Strauss and Corbin, 1990). Quantitative research technique is associated with collecting individual data and aggregates are to study organization. Hence they are linked with any measurable thing or figure; providing the examiner with range of numbers, which are available in figures, graphical forms, and tabulations.

Data Collection:

The Data was collected primarily and secondarily. Total number of 10 questionnaire samples was used to obtain primary data from Customers; I had used an online survey. I built and an online survey with the help of free online survey web site and then I share the link online and via email and via social networking website and soon I stated receiving the responses. All the people were targeted who were mostly visiting the Primark and Poundland very often. They have had specified the clearer opinion about their shopping behavior. This survey will help me to find out the root level reality about the low price strategy and how it works and affect the common people. It will also help me to make the decision that is the people are really enjoying the offers of low price strategy or not. And is it beneficial to the selected companies or not. While secondary data taken from books, and helpful websites. This helped me to be familiar with the role of Low Price Strategy in any organization especially in Poundland and Primark.

To start with, a survey plus informal debate with 30 customers was used to have a common view; to determine to what level they are worry with the low price strategy (low cost as well according to the business glossary) used by whichever Poundland or Primark; and on the selling market in common. Secondly, data is provided by the 2 companies through their websites (www.poundland.co.uk, and www.primark.co.uk) Along with the help of book (Michael E, Porter) and information was helpful to have an improved accepting of the low price Strategy

Population Sample:

For the reason of this study convenience sampling will be considered. A sample of 40 Customers approximately was considered from different areas. To rush the collection and response, questionnaire was circulated through social networking websites like facebook and email. A total amount of more than thirty one filled questionnaires were returned and rest was not completely filled.

ANALYSES OF RESULT:

The reason of this research is to find the role of Low Retail Strategy in the market of UK and I have the perfect examples of the two giving stores which help me to study about this strategy. And with the help of this survey it is very easy to understand the that the customers do appreciated the low prices of the products they need and if this strategy is followed by other giants of the market then there will be a big price war. But only those companies will be successful who will not only reduces the prices but will also focus on their quality of products as well as their customer services.

Questionnaire and its outcomes:

Here it will be discussed that how the questionnaire is analyzed. The report used a convenience sampling by distributing a total number of 97 people and the questionnaires was containing 10 questions but only 66 people had return the filled Questionnaire and I consider the 66 filled questionnaires. For this survey I had build a survey on a free online survey website which is www.instant.ly/survey and I had share the link via my email and over the facebook communities.

The following grid shows the entire history of the survey performed by the people who were involved in this survey “Londoners” in the first column stands for the people I hit were random customers lived in the London city and their ages were from 20 to 35. They were contacted through emails and a survey website. The 39 people had opened the link of survey and out of 30 of them had completed it. The second column show they survey link I distributed through web email and got the responses email was sent to 46 and 26 had completed successfully. The last shows the facebook contacts these people helped to performed 10 surveys out of the 12. The total number of 97 people was touched and 66 were the successful responses.

Your Gender is?

The first question of the survey is about the gender, it was essential to ask and to know the trend that how many make and female are more attracted to this strategy. Therefore according to the result 53% males likes the lows price retails and purchasing the item on low price from Primark and Poundland as compare to Females which were just 47%.

Q2: What time did you last shop? (Whichever clothes from Primark or Grocery from Poundland).

Gender proportion categorization according to the super store:

In the next question of the survey it was asked to the people that when they shop last time on the two specified stores. They were gives the few options to choose which were, did they shop this week? Last week or more than a week ago? In the result 30% people said they shop this week, while 18% had shop last week and nearly 52% people had shop more than last week.

Below the graph is a table grid which distinguished the males and females who shop according to the question 2. According to that 30% male and 25% female shop from the two given stores during the current week. This makes the total number of