Retailers Manipulate Prices Under Competitive Pressures, Fix Different Prices in Different Markets

Organized retail is a tough business and it has been developed into a science with so many factors to be taken care of simultaneously. Since profit is the prime objective of any business, retail is no different and it applies a flexible pricing strategy to maximize their profits. This fact was revealed by a study conducted by Kelkoo, the shopping website. They undertook an extensive research in many towns of UK and checked the prices prevalent for a wide range of articles in different towns in the same chain of stores.

The results were startling to say the least. In a basket of 200 goods there was a total of a £537 difference between the cheapest location, which was London, and most expensive, Swindon. The average difference in the highest and lowest came to an understandable 4% but in case of certain articles the difference between the highest and the lowest was an unexplainable 9%. Currys priced a Sony Bravia 24 inch TV at £349 in Swindon and Aberdeen but the same product was £30, or 9 per cent, cheaper in London at £319. Even more startling was the case of Comet selling a Krups Gusto Coffee Machine at £119.99 in Carlisle and Slough and selling the same gadget for £103.99 at their London store.

Chris Simpson, marketing director, at Kelkoo explained this phenomenon as a result of competitive pressures. In order to maintain the sales volumes and the profitability of each store the store managers were given the freedom to manipulate the prices in reaction to the local competition. This trend was very evident in the results of the study as the prices drifted upwards in the quieter rural areas with less competition and the prices were pressed lower in London Area Stores where the competition is intense. The retailers are under constant pressure to maintain the balancing act of offering discounts and special offers, whilst still protecting their profit margins.

Via: telegraph

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