Long-Term Low Pricing Is a Bad Business Strategy For Food Wholesalers

Everybody loves a bargain - but being too competitive on prices can, eventually, really hurt a business.

At a time currently where food prices are ever-increasing (Britain has seen three consecutive spikes in value since 2007) competition between wholesalers is ever more fierce than ever, and evaluating yourself too high or too low provides competitors an opportunity to have advantage over everyone else.

So how can wholesalers adapt with their own price evaluations to stay with that competitive edge?

Assessing the market

The beverage and food trade is one in all one of the most erratic industries, with shopper demands changing by season, media attention (remembering the 'horsegate' episode) and even tabloid diets.

Keeping attentive to the market before shopper demands is all alright - but the food provider competition should be taken into serious thought if food wholesalers wish to be ahead the trade trends overall.

Constant competition with the major supermarkets sees dynamic changing of end-user costs, and wholesalers will need to keep up with those variations if they're to fulfill client demand.

But, it's not all about the cheapest price: customers genuinely demand quality just as they like a low price - a 2012 Britain grocery survey found that just 25% of shoppers want the lowest of low price, whereas 28% expect larger amounts of quantity the most important for his or her budget, and 21% see cost for best quality within their budget.

Quality over quantity:

The purchase of Somerfield by Co-op spelled the closure of Somerfield branch in a small town, this was because of the existence of a Co-op store within the same area.

A local fruit and veg supplier bought the store space, and thrived with a restaurant and cafe space selling food made locally.

Despite higher turn out costs, the merchandiser had assessed that customers wished quality over price. Even if the competition between the chain merchandiser and independent store existed, each had their own niche - the chain provided some products cheaper overall, the freelance merchandiser delivered quality turn out that met the customers needs.

The value of promotion

A wholesaler with prices too low will risk putting off retailers from them: while the obvious appeal of a larger profit margin for the retailer is expected, they have the same doubts as the end-user and will also question the practicality of the supplier's business.

Continuous low-prices used as a competitive strategy has been proven to be an ineffective business model - whilst it can be a advantage temporarily, prices being low can be easily matched and eventually the frequency of profit-margin changes all becomes a bit silly. However, changeable pricing can bring advantages. Implementing large order promotions, introductory product prices or even rebates can attract customers and helping retain a buyer base which is loyal.

Lakeview are a effective ERP and accounting solutions company that are here to help you support your production network with our vast array of bespoke software solutions and services.

By Sadie Hawkins