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The four major grocery pricing strategies are: Popular with savvy bargain hunters who save by stocking up, these supermarkets offer deep markdowns on some items. Typically, high-low grocers offer an enticing array of weekly , promotions, buy-one-get-one-free, or BOGO, offers and special discounts for loyalty-card holders. The grocers recoup their lost profits by charging slightly higher margins on other items. High-low grocers also typically charge vendors for warehousing, shelf space and promotional displays. High-low chains include Kroger, Publix, Safeway and Winn-Dixie. Consumers now have more weapons than they have ever had. Popular with price-sensitive shoppers, EDLP retailers negotiate rock-bottom wholesale prices from their vendors in lieu of charging fees. They then pass on the savings to customers. EDLP chains include Walmart, Target, Food Lion and Lucky. Discount clubs make their profits from membership fees and reduced overhead. As a result, their markup is usually half that of supermarkets. Their warehouse stores typically stock a small fraction of a supermarket’s inventory (1,500 items or so) and package it in large quantities to maximize the savings to members. Discount clubs include Costco, BJ’s Wholesale Club and Sam’s Club. Although these retailers generally carry fewer than 1,000 items, they specialize in selling name-brand products packaged to sell at attractive prices. Aggressive pricing stores include Dollar General, Family Dollar and Dollar Tree. Each pricing strategy offers bargains for shoppers willing to put in the work, says Neil Stern, a senior partner at McMillanDoolittle LLP, a retail consulting firm in Chicago. “High-low stores have lots of deals if you’re willing to be a card member, if you’re willing to switch brands, switch sizes and pay close attention to what’s on sale,” he says. “EDLP is hard to beat on price, but they may not have your brand of everything. The clubs have a limited assortment and you have to buy in quantity, but you know their prices are going to be great.” Mixing it up
In theory, high-speed computing and data crunching allow retailers to counterpunch a competitor’s prices on a daily or even hourly basis. In reality, most supermarkets remain slaves to the ingrained weekly cycle of their advertising and vendor deliveries. That said, retailers mix up marketing today as never before, making it more difficult for consumers to dial into a store’s sales rhythm. Even Walmart, the nation’s largest by far, offers three pricing tiers: EDLP, “rollback” and “save even more,” which is essentially a sale. “It’s become extremely dynamic now,” Stern says. “You’ve got this gigantic competitor that has forced its competitors to get a lot smarter and more sophisticated about what they’re doing.” With margins already wafer thin and everyone from Target to Ikea invading the food space, grocery chains are doubling down on loyalty programs and mobile technology to attract and retain customers. In the near future — given your consent, of course — that same loyalty program will know when you enter the store by the GPS on your mobile phone, and use it to guide you aisle by aisle to advertised and unadvertised savings based on your shopping history. “They are trying to see how to best customize their value to you,” Shankar says. “Once you learn their pricing strategies, you just experiment to determine their value proposition to you.” Related Links: Bankrate survey finds the good reason why Americans aren’t spending more Related Articles: Cost of a root canal How much does LASIK cost? SHARE: Jay MacDonald Related Articles