This paper examines the pricing competition between Woolworths and Kmart as described in Sue Mitchell's article "The Battle of the Big and Cheap." It analyzes Woolworths' competitor-driven pricing approach, its reliance on cost reduction to offer lower prices, and its reluctance to adopt Kmart's rounded-pricing and streamlined product-range strategy. The paper argues that an excessive focus on price competition, at the expense of positioning, customer relationships, and the broader marketing mix, risks repeating Kmart's earlier costly price war with Walmart. It also highlights how consumer psychology around price presentation has shifted, making decimal pricing less effective than it once was.
In her article aptly titled "The Battle of the Big and Cheap," journalist Sue Mitchell examines the stiff pricing competition between major retailers and how it has been hurting or improving sales from year to year. The article focuses on the pricing strategies of Woolworths as it competes with Kmart to keep prices competitive and to consistently undercut the competition. However, this approach has not proved profitable: in 2010, Woolworths recorded a significant drop in sales after experiencing positive growth in 2009.
The main pricing approach for Woolworths has been driven by competition. The retailer focuses on external factors — chiefly its competitors and their pricing moves — and adjusts its own prices accordingly. Kmart has been its primary rival, and following Kmart's lead has helped Woolworths draw customers' attention to its everyday low prices. Understanding how retail pricing dynamics shape consumer behavior is central to evaluating whether this reactive strategy can be sustained long-term.
Kmart has moved to rounded figures for its pricing and slashed its product range from 75,000 to 45,000 items. These two decisions together have given Kmart a significant edge over Woolworths in the pricing competition. Woolworths, by contrast, has chosen not to follow the same path. It has neither reduced its product line nor adopted a rounded-pricing method. Instead, it remains focused on keeping costs down in order to pass savings on to customers while offering a much wider variety of products. The retailer is not paying adequate attention to other important factors — such as brand positioning and the buyer-seller relationship — that also drive sales.
"Overreliance on cost-cutting mirrors Kmart-Walmart price war"
"Decimal pricing loses effectiveness as consumers adapt"
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