It is easy for analysts and consultants to lecture retailers about the dangers of price wars. But what can a supermarket operator do when the competitor across town -- or worse, across the street -- suddenly starts offering triple coupons, buy-one-get-two-free and other extreme promotion tactics?
inctive reaction of a retailer to a price cut by a rival is to match the new, lower prices. The usual reply to this on the part of the rival is to further lower prices, he continued, and thus begins a downward spiral that benefits neither merchant. "Price wars generally result in a great deal of mutual harm," he said.
The better answer to a price challenge, he noted, is "to narrow, but don't close the gap. The impact is reduced significantly."
The industry source, however, has no illusions that his suggestion will keep supermarket operators from fighting fire with fire, or triple coupons with three-for-the-price-of-one.
He's given this advice to many store owners, he recalled, "and good retailers have looked me in the face said, 'That's not what we're going to do here."'
