Why you should not use price competition as a strategy for success

The electro­nics indu­stry faces its doom­s­day, and has done so for many years. Ever sin­ce the Ger­man giant Media Markt had ente­red the Swe­dish electro­nics mar­ket, it was a hard and ruthless price war. The losers were and are nume­rous; count­less Swe­dish chains have fal­len into batt­le. Latest to fall is Siba, but befo­re that it was Expert and also the enchan­ting OnOFF. For­got­ten and wit­hout tomb­sto­ne. Nowa­days, it is reve­a­led that Media Markt will most cer­tain­ly give up Swe­den and sell its 27 sto­res it occu­pi­es. So what was the point of all this in the end, one might ask? As it stands now, eve­ry­o­ne loses – the indu­stry has taken a lot of stick, but the con­su­mer have not sur­vi­ved unhar­med. Even though the­re have been con­stant sales and nega­ti­ve mar­gins on electro­nics custo­mers more than enjoyed over the years, the day has come when the ven­dors have to start char­ging for the par­ty that was. Custo­mers need to pre­pa­re and rea­li­ze that the days when a TV or cost $299 US dol­lars are over and they should not be sur­pri­sed if it sur­pas­ses that price by doub­le.

To ven­dors and retai­lers: do not be afraid to char­ge for your hard work! Set pri­ces that will cover your expen­ses, depen­ding on your posi­tion in the mar­ket, the natu­re of your goods and ser­vices and how your com­pe­ti­ti­ve situ­a­tion looks. Dare to put pri­ces abo­ve the retail price. Assu­me you may be for­ced to sell out parts of your inven­to­ry, pro­duc­tion loss and other cir­cumstan­ces that may put your busi­ness in dang­er. Other might hope­ful­ly follow.

Will the win­ner always be the one that is under­sel­ling and repor­ting los­ses to cut the com­pe­ti­tors? It abso­lu­tely does not have to be that way. Pack your ser­vices or goods in such a way that you offer added value and become uni­que in your deli­ve­ry or find your own niche by offe­ring pac­kage solu­tions and ser­vices that are not explo­i­ted. Here you will find the gol­den midd­le ground whe­re the ove­rall expe­ri­ence is gre­a­ter than the sum of your pac­ka­ged parts. Always make sure that each deli­ve­ry pro­vi­des more than the custo­mer expects. Sounds like a no-brai­ner? Well, this is somet­hing you can not afford if you sell with no mar­gin of pro­fit. The com­pa­ni­es who can hand­le com­plaints with “I will ship you a new pro­duct, and you do not even have to return the defect” gets not only long-term custo­mers, but also almost com­ple­tely eli­mi­na­tes the cost of com­plaint hand­ling. Make sure you have a hig­her mar­gin on your pro­ducts that you have the oppor­tu­ni­ty to give your major custo­mers a free discount, thus run­ning tem­po­ra­ry pro­mo­tions, laun­ching new pro­ducts and pac­ka­ges, all with a retai­ned base mar­gin.
You will never lose custo­mers by lowering your pri­ces, but a neces­sa­ry sud­den for­ced incre­a­se may be devas­ta­ting to the custo­mer base.

Disclai­mer: This artic­le was ori­gi­nal­ly writ­ten by spa­re parts, tools and acces­so­ri­es who­lesa­le dis­tri­bu­tor Teli­us to its retai­lers situ­a­ted in Swe­den and Scan­di­na­via.