What Is Everyday Low Price?
Everyday Low Price (EDLP) is a pricing strategy used by retailers which promises customers the lowest prices in their store without having to use a coupon, wait for a sales event, or take any other actions to get a reasonable price on the items they purchase.
What Is the Difference Between EDLP and High-Low Pricing?
Whereas an EDLP strategy does not use coupons, sales gimmicks, and the like, High-Low pricing strategies rely on these tactics to build excitement. High-Low refers to a retailer purposely pricing an item at a high price with the intention of selling it at a lower price in the future via a sales event.
For example, two retailers may be selling the same TV. One retailer has an EDLP strategy of pricing it at $400, while the other takes a High-Low approach and initially sets the price at $600. During a sales event, the second retailer will then take the price down to around $400.
Why use High-Low when EDLP seems simpler? It’s in the perception of the customer. Some will shop for the EDLP price the first time. But there are marketing advantages to High-Low.
By pricing the TV high then marking it down, the customer feels they’re getting a higher quality product at a more affordable price. It also sets up the perception that the first retailer must have cut corners and compromised quality to price the TV so low in the first place. While neither may be true, the High-Low strategy still works effectively as a marketing tool against EDLP on some items.
How Does Walmart Provide EDLP?
Walmart understands shoppers have more options today than ever before. Providing EDLP to its customers is more than monitoring the competition and taking appropriate action on pricing. The first place Walmart works to provide EDLP is in the standard it sets for Walmart suppliers.
To set a low price on any item, the supplier must reduce the cost of creating, warehousing, and shipping the item. Walmart goes to great lengths to help suppliers improve their supply chain process. With initiatives like On Time In Full (OTIF) and the Supplier Quality Excellence Program (SQEP), Walmart holds suppliers accountable for every step in the process.
A smooth supply chain reduces cost, and reduced cost can be passed on to the customer in the form of a lower price on the shelf.
How Can the Use of an EDLP Strategy Increase a Retailer’s (or Supplier’s) Profit Margin?
An EDLP strategy relies on volume. Both the supplier and the retailer benefit from EDLP’s focus on volume, but in slightly different ways. Single-item volume is the biggest benefit to the supplier, while the volume of items in the customer’s basket at the checkout helps the retailer.
For the supplier, the strategy is selling more of their item at a lower price. While the profit margin is lower, because of a greater quantity of items moved, more profit is gained through the greater number of items sold. Greater quantities sold can also lead to benefits from their store merchants (more shelf space, feature space, inclusion in promotions, etc.).
For the retailer, volume on the number of items in the basket at checkout is the real advantage of a store-wide EDLP strategy. Customers may visit a retailer for a few items marked down or buy-one-get-one specials. However, if other items in the store they need are above what they normally pay, they’ll usually wait and purchase these items elsewhere. If the customer trusts that your store always has a low price on a variety of items, they’re more inclined to stock-up or shop various categories knowing they’ll get a fair price.
Even though margins are lower with EDLP, the higher volume of items sold makes for greater profit at the end of the day.
What Does an Everyday Low Pricing Strategy Convey to Consumers?
EDLP is more than a pricing strategy. It is a commitment to the consumer that the retailer is giving them a fair price for their items the first time.
The retailer is not expecting the consumer to work, wait, or in any way earn a better price for the items they want. Trust is built to ensure the retailer has worked to give them a low and fair price without compromising the quality of the merchandise.
Do Shoppers Benefit When Stores Use Everyday Low Pricing?
Whether or not shoppers benefit from retailers using an EDLP strategy depends on how the retailer negotiated a lower price.
If a retailer is able to offer a lower price by purchasing the merchandise in greater quantity, improve the supply chain, or reduce production errors, then EDLP is a huge benefit to the shopper.
The EDLP commitment fails the customer only when the quality of the product is compromised to ensure a lower price. If the retailer expects an item at a specific cost, a supplier will sometimes deliver on that cost by using a lower standard of materials. The customer gets the price they want but may have preferred to pay more for a better quality product.
What Types of Retailers Generally Use an Everyday Low Pricing Strategy?
EDLP is a pricing strategy most associated with large retailers. Walmart has arguably been the most associated with EDLP. For years, Walmart’s marketing has centered around some variation of Every Day Low Price, Everyday Low Price, Low Prices Every Day, Always Low Prices, etc.
Outside of big box retailers, small store chains and even merchandise suppliers have used EDLP as a strategy and in their marketing.
What Retailer Created the Term Everyday Low Price?
EDLP is associated with Walmart as the company has used it consistently in its marketing. As a pricing strategy, Walmart founder Sam Walton used EDLP when opening his first stores.
Whereas Kmart had been successful with a High-Low strategy, Sam Walton believed early on that keeping prices low (even at a slimmer margin), would bring higher profits through greater sales volume.
“Everyday” Low Price or “Every Day” Low Price?
Depending on how long you’ve worked with or shopped in Walmart, you’ve seen both versions in their marketing over the last few decades!
Walmart Marketing used to promote the pricing program as Every Day Low Price (“Every Day” being two words on marketing materials). The thought was that every day you will find the low price you’re looking for at Walmart. It reinforced Walmart’s consistency in its pricing strategy.
The company changed the marketing message to Everyday Low Price (“Everyday” being one word). The message is similar: the low prices you find every day in Walmart are not limited or fluctuating. They are simply the Everyday Low Prices customers have come to expect.
Conclusion
Today’s shoppers have more options than ever before. They are looking for the items they want, when they want them, and at a price that seems fair the first time.
Retailers that adopt and promote the EDLP strategy are making a commitment to their shoppers. They are agreeing to work with suppliers to offer low prices without the need for sales or gimmicks to get the best bargain.
For the retailer, EDLP establishes a sustainable business model to promote a better supply chain, consistent pricing, and trust with the customer.
