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Is it really all about price or price perception?

Lowest Price Guarantee

With the key Easter trading period almost upon us, it's fascinating to track the pricing and promotional games of the major retailers as they jockey for position to be first choice for the UK consumer.

We track daily, the prices, promotions, reviews and availability of more than 250,000 home improvement products across 20 retailers; which provides a unique insight into their activities, as they desperately try to hold onto market share over this key period.

One of the surveys we create using this data is the iPaint30, a basket of 30 of the best selling, directly comparable decorating products that we survey across B&Q, Homebase, Wickes and Wilkinson. Yet again, this week, Wilko has come out as the lowest price retailer for these key lines, with a total basket value of £262.15 (with amazingly 23 of the 30 lines being lower priced in Wilko, than anywhere else). Second is B&Q, over 15% more expensive at £302.48, Wickes next at £329.08, a whole 25% more and bringing up the rear, Homebase at £347.98, a whopping 33% more expensive than Wilko. Bunnings, you have such a lot of work to do!

Check out the line by line detail of the iPaint30 basket comparison here.

These stat's probably come as something of a surprise, as indeed they did to us. Why? Because Wilko are doing nothing about it. They're under major price pressure across their 'FMCG' product categories from the discounters including Poundland, B&M, Aldi and Lidl just to name a few. In these categories, they're contributing to a race to the bottom as they try to remain competitive and yet in DIY, where they clearly have a distinct and significant price advantage, they don't tell a soul. As a result, no-one knows and the consumers won't be choosing Wilko to buy their paint ahead of B&Q, Wickes or Homebase this Easter weekend.

I recently presented at a BHETA (British Home Enhancement Trade Association) forum on the subject 'Retail Prices - avoiding the race to the bottom'. My research for the presentation, unsurprisingly, led me directly to Amazon and the startling fact that they change up to 2.5 million retail prices every day. The prices of some individual lines will change - wait for it - as often as 8 to 10 times a day. This compares to around 50,000 price changes a month at Walmart and probably less than half of that at B&Q, Homebase and Wickes.

Internally, Amazon aspire to be 'The fastest follower of the price leader' which means they remain competitive on all products at all times, or does it? The reality, is that they change prices and remain ultra competitive on just 5-10% of their product range, the 5-10% of products that equate to between 30% and 50% of sales and very interestingly, around 50% of online searches. This means when we search for products, most of the time, Amazon come out competitive and as a result, we believe they are cheaper on everything, when in reality they're not and are often undercut by other online retailers. In the Bathroom Category, Victorian Plumbing and Plumbworld beat Amazon hands down on price, almost every day of the week. 

So, back to the question, is it all about price or price perception? I think you already know the answer.

Wilko are cheapest on Paint and yet nobody knows, Amazon are only the lowest priced retailer on 10% of their product range and yet you and I have made them one of the largest retailers in the world, believing that they're the lowest priced retailer on everything, every day.

Keep a close eye out for perception, it really is everything. 

You can download the 'Retail Prices - avoiding the race to the bottom' presentation here.

If your business needs competitor intelligence, get in touch here.

Source: Steve Collinge, MD Insight Retail Group Ltd. Feel free to tell me your views at Steve@irg.co.uk

 

22 March 2016

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Thank you for the excellent presentation that you gave at Woodbury Park on Thursday morning. It was very interesting and thought-provoking for our Retail members. The feedback has been excellent.

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Martin Elliott. Chief Executive - Home Hardware.
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