This would help in preventing theloss of sale on high margin products and stop the switching pattern ofconsumers. Additionally opportunity costof stock out is significant, hence Value4u would continue to invest ininventory.
This would help the firm saveon supplier costs resulting from rush orders. Value4u is certain that reliableproduct availability is an investment in future market share. Geographical Segmentation Strategy complemented by demographicalfeatures:Value4U’s stores will be openedin and around Pune region. Primary focus is low and middle income consumersthat reside in these regions are sensitive not only to prices but also to theirbudgetary constraints. Such segment of population invests heavily in searchcosts with long term efficiency at the back of their mind. Budget on groceryforms significant economic expenditure1for this strata of the population and hence invest in search costs. Althoughsearch costs may prove to be expensive in the short run, long term yieldsoffset the costs. Population segment under consideration continue to followshopping pattern once established and economical and financial constraintsresults in higher switching costs favoring status quo till there is change inbenefit cost derivation.
Value4U would also prioritiestheir shelf space. The firm will stockslow moving items only if they are promoted by suppliers or manufacturers. Slotting fees will be charged for such items.
If possible, firm will also keep the option of extracting failure fees if itemsdo not meet sales criteria within stipulated time. Private Labels- Value4U will focus on own private label i.e.Value4U currently has product portfolio of more than 325 items catering to stapleneeds of consumers. Firm will persist with discounts and promotions on privatelabel to generate footfalls and conversion. Own private label have highermargins and concurrently consumers benefit from lower prices.Value4U will prioritize pricingstrategy over volume growth strategy. Retail industry has become fiercely competitive.
Some of the majorretailers have financial cushion, some possess distinct capabilities, whilesome focus on product assortment to increase basket size. Value4U will not focuson volume growth to gain market share. Probability of increasing profitabilitythrough volume growth is very restricted. Pricing strategy: Price has very high leverage on profit ifmarginal cost is over and above zero. Price increase is related with profits.On the contrary, volume growth elevates profits only by additional revenueminus marginal costs.Necessary and essential productshave high promotional intensity that goes a long way in generating the shoppingtraffic.
Therefore requires low price consistency. Contraire, nature of perishable products impelthe rotation of the inventory. This petitions dynamic pricing strategy. When FMCG firm start price warsby utilizing promotions as price discrimination mechanism, Value4u will lowerthe prices of private label brand below those FMCG promoted products. This will help Value4U prevents switching ofprice sensitive customers. Anotheradvantage in employing this strategy is this would stop customers from stockpilingFMCG products.
Applying prices which arelower than FMCG product will be undertaken only when FMCG engages in promotionsat our store. It is proved in numerous academic as well as empirical researches2that promotion affect reference price of the product. Frequent promotions withdeep discount decrease reference price for customers. Consequently, customerswould wait for promotion to make purchases and go on stockpiling strategies. Also, promotional elasticities if exceedprice elasticities, then regular pricing strategy will not yield any growth forthe store. Value4u pricing strategy isconcurrent with rational economics i.e. follow uniform pricing theory.
Storewill keep uniform prices for all categories of customers. To expand further, ifthere are customers who are one store shoppers then buying private label fromthe store may bring additional purchases in other category. Customers who are two store shoppers wouldalso benefit because such strategy enables them to reallocate their demandsbetween two stores without incurring extra search costs and in the long run mayhelp them switch to Value4U brand completely. Furthermore, using price discriminationstrategy within the same consensus tract would lead to confusion and customersmight even become disillusioned with the Value4u store, if they find differentprices in contiguous stores. Be as itmay, Value4u, would consider price differentiation strategy in diverse tradearea provided these are dispersed and could provide opportunities for increasedgross margin and efficient inventory control. Time Management Strategies3- shopping at supermarket, convenience stores involved two costs i.
e. fixedcost and variable cost. Fixed cost consists of checkout, parking, and time toand from supermarket. Time required to buy products not available atsupermarkets can be thought of as variable cost.
Hence, Value4U will provideall the necessary i.e. staple products in the shops. This will help consumer’svariable cost and opportunity cost of time. Storage cost strategy: low income consumers may not have storagefacilities available.
So Value4u with its large reach cater to this populationsegment handsomely. Having multiple stores within walking distance would helpthem purchase the product as and when needed at low prices. High Income groupsave by buying in bulk as they are indifferent to price elasticity because ofstorage available for them. Value4u is trying to develop inventory as a formof sustainable competitive advantage. Rationale behind this strategy is –supermarket could modify inventory and staffing decisions in real time and thisis the incentive that would help the firm in making investments in productavailability. Secondly, switching costsfor consumers.
Consumers are accustomed to a store’s layout, they havedeveloped knowledge of shelves where regular and routine products are stockedand if a supermarket runs out of inventory, consumers are forced albeitreluctantly to switch either to alternative 1 Stigler (1996)researched that, the more economically significant expenditure is to thehousehold’s budget, the greater would be the gain from searching for lowerprices. 2 Insert full references Schindler 1984a,1984b, Robert Blatterberg3 Timeuse in shopping: The role of personal characteristicsJournal of Retailing, Volume 70, Issue 4, Pages 345-365William J. McDonald