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Is it really all about price?

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With the recent aggressive pricing moves from Bunnings/Homebase and the response from B&Q and now Wickes, 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 25 retailers; which provides a unique insight into their activities, as they desperately try to hold onto market share over the key April and May trading periods.

I presented earlier this year 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 20% of that at B&Q, Homebase and Wickes.

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

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 always and are often undercut by other online retailers. Usng the example of 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 really all about price? I think you already know the answer.

There's no doubt that the current price war between Bunnings/Homebase, Wickes and B&Q will be a damaging one from a margin and profit perspective. You have the largest DIY retailer in the UK who will not accept being undercut by any competitor; you have Bunnings, the largest DIY retailer in Australia, who's No.1 priority is to improve the price perception of the newly acquired Homebase business and you have TP owned Wickes, who are equally unwilling to let go of market share.

This aggressive pricing and promotional activity is unlikely to bring new people into the market. Those consumers who purchase on-line are not suddenly going to decide to go back into a DIY store again, when they can get better prices, service and faster delivery elsewhere. In 90% of cases, we know from our research, that consumers shop at the nearest geographical store to their home and when there's a choice of stores nearby, it predominantly comes down to price and availability.

The winner of the price war, will not only be the retailer who offers the lowest prices day in and day out, but it will be the company that shouts the loudest and reaches the most consumers with the right offer at the right time and that will be fascinating to watch.

Who's going to come off worse in this battle of the titans? Well, we'll let you decide.

Click on our survey link below and let us know whether you think B&Q, Homebase, Wickes, Wilko or the High Street DIY Independents and Garden Centres will suffer.

Who do you think will come off worse in the DIY price war?

If your business is interested in pricing intelligence or you're currently trying to track retail prices manually, there really is a much easier way, just contact us here.

Source: Steve Collinge, MD Insight Retail Group Ltd. 

If you'd like to make a comment, please email me at Steve@irg.co.uk.

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21 April 2016

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