Allen Software

Another Battle

Large fashion chains now enters the battle of prices, as supermarkets recently. Chains such as Mango, Springfield, HM, and Bershka are tightening the accelerator pressed also by others such as Primark and Kiabi. The battle of prices on the one hand entails reductions in margins of profitability of the contenders, and in many cases reductions in quality, which can come from multiple sources: raw materials, in the quality controls, in the workforce involved in garments. It may also come from trimming the margin of providers, which is squeezed more. In both cases, this drop in profitability, which in principle it seems beneficial to the consumer, can have side effects, such as dismissals in companies that reduced their margins. The battles of prices must also consider the cost structure of the contenders, in this case they all large fashion, so the battle is hard. For example, in the case of the Irish Primark, a little less known in Spain, where it has with Twelve shops today, its success is based on very competitive prices with a product from a medium quality (therefore with a relationship quality price very good), with large stores, more than 4,600 m2, and location in commercial areas. You need to make other remarks regarding the prices and its effects wars, normally very negative, since in addition to the already discussed, they can get to fix a psychological level of price for customers, so that later it can be very difficult for companies to recover their normal level.

In addition, they encourage a short-term view of the company, instead of looking for the survival and development of the same long-term. They do not usually discriminate between customers or customer segments, so that benefits all the world, and not only good customers. Not only must compete on price, on many occasions would be more cost-effective to compete on service, especially when there is excess capacity wasted, so that could be a better service to the customer without barely increasing the cost. Original author and source of the article.

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