Competing in price wars. Is it really worth it?

Competing in price wars. Is it really worth it?

Being the cheapest doesn't mean you're the best!

Is it cheap and cheerful that people are after? Sometimes, maybe it is. At least that's how Poundland approach the world of business. Some of their products are more expensive than they're worth it turns out. Shampoo, for instance, which can be bought from a local shop which I know for 86p. On the other hand, though, they're a lot cheaper for other market-like products, such as their DIY tools. But is it really worth it buying a screwdriver that's going to be handleless after a couple of uses? To back this up, my friend bought one once...the next day the handle dropped off! Just like that, for no apparent reason. He didn't apply more pressure to it than he did any other screwdriver, and they didn't have their handles drop off. So, there is some truth to this.

Now, I'm by no means suggesting that being cheap and cheerful is bad. After all, Poundland are a very successful company! So it would be a lie if I were to suggest such things. However, what I am trying to point out is that it's not always worth it to be the cheapest. A lot of large companies can afford to be cheap. It sounds funny to say this, but it's true. They can afford to buy things in such large numbers that they get bulk discounts. They can then afford to sell each individual product for less than you, who bought perhaps a small pack of 100, and didn't get such a large bulk discount. Get my point?

To compete against the prices of a large wholesale company could be suicide. If you try to sell your products for less than they are, yet you're paying more than they are, then how on earth are you going to make profit? It's not even worth trying, if you ask me.

Perhaps, instead, try something special. Say, for instance, you're selling a mobile phone. The Carphone Warehouse are selling this phone for £59.99 and you are forced to sell the same phone, but for £64.99. You paid, say, £60 for the phone, whereas The Carphone Warehouse may have paid only £55. You're each, in this scenario, charging around £5 more than you paid, but one shop is £5 cheaper than the other. Which are the customers going to buy from? The one that's £5 cheaper, obviously.

Perhaps if you offer your phone without charging the customer any upfront cost. Instead, say, they pay a small weekly payment of £5 for a duration of 15 weeks. That would earn you, in the end, £75. I can tell you that The Carphone Warehouse don't do this. Their idea of no upfront fee with a small regular payment is commonly known as a 24 month contract! Stay clear of those if you possibly can!

Of course, the customer would have to have an acceptable credit status, and it would be your responsibility to carry out credit checks. But they would not have to be subjected to any contract, either for the phone or for the mobile tariff. You could sell a Pay As You Go mobile device, absolutely contract-free, for small weekly payments with no upfront fee. Guess what, this is the Littlewoods touch. And they are one successful company! I use them too, and for that one reason! I don't have to pay the full price upfront. I'd recommend Littlewoods to anyone!

Apart from Littlewoods, however, there are not many reputable companies which offer this. And to compete against the small number that currently do so will be nowhere near as complicated as trying to participate in a price war against a big shopping giant such as Amazon.co.uk.