Sue Mitchell, We Learn of

¶ … Sue Mitchell, we learn of the stiff pricing competition between major retailers and how this has been hurting or improving the sales each year. The article aptly titled "The battle of the big and cheap" focuses on pricing strategies of Woolworth that has been competing with Kmart to keep prices competitive and to consistently offer lower prices than the competition. However this has not proved to be a profitable strategy since in 2010, Woolworth saw significant drop in sales after experiencing some positive growth in 2009.

The main pricing approach for Woolworths has been driven by competition. They focus on external factors such as the competitor and their pricing moves to adjust their prices accordingly. Their main competitor has been Kmart and following its lead has helped Woolworths attract customers' attention to its everyday low prices. However with Kmart moving to rounded figures for pricing and slashing its products from 75,000 to 45,000, it has been able to earn a significant edge over Woolworths where pricing competition is concerned.

Woolworths chooses not to follow in the same footsteps and hence has not slashed product line or adopted rounded pricing method. It's more focused on keeping the costs down in order to be able to pass on the savings to the customers while offering them a much wider variety of products. Woolworths is not paying closer attention to other important factors such as positioning and relationship in order to drive its sales. Instead it has been heavily focusing on cost reduction and competitor's prices.

It will probably learn the hard way what Kmart learnt when it started the same kind of price war with Wal-Mart and suffered immensely. As the result of that war, Kmart finally had to declare bankruptcy when Sears stepped in and took over Kmart operations. Woolworths somehow has failed to see this connection as yet.

But it soon will as it continues to lose customers and sales continue to fall unless it does something dramatic like changing its pricing approach completely and focusing on buyer-seller relationship and marketing mix to come up with a much better pricing strategy. Its failure to move from decimal system.